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Notes to Accounts of Kajaria Ceramics Ltd.

Mar 31, 2017

1. Significant accounting judgments, estimates and assumptions

The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and assumptions are continuously evaluated and are based on management''s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

In particular, the Company has identified the following areas where significant judgments, estimates and assumptions are required. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements. Changes in estimates are accounted for prospectively.

Judgments

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

Contingencies

Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgments and the use of estimates regarding the outcome of future events.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market change or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(a) Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or CGU''s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

(b) Defined benefit plans

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

(c) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

(d) Impairment of financial assets

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

Notes:

# Loans are non-derivative financial assets which generate a fixed or variable interest income for the Company. The carrying value may be affected by changes in the credit risk of the counterparties.

* Represents loans given to subsidiary companies and include Rs,62.18 crores (March 31, 2016: Rs,40.24 crores, April 1, 2015: Rs,24.37 crores) given to "Kajaria Bathware Private Limited” in which directors of the company are also directors.

B. Terms/Rights attached to equity shares

The company has only one class of equity share having face value of Re 1/- per share ( 31 March 2016: Rs,2/- refer note ''C'').The holder of the equity shares is entitled to receive dividend was declared from time to time. The dividend proposed by the Board of Directors is subject to approval of the shareholders in ensuing annual general meeting. The holder of share is entitled to voting rights proportionate to their share holding.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive assets of the Company remaining after settlement of all liabilities. The distribution will be in proportion to the number of equity shares held by the shareholders.

C. Share Spilt during the current year

The equity shares of the Company were split off from face value of ''2/- each to ''1/- each. In this regard, the Board of Directors of the Company has accorded its approval at its meeting held on June 16, 2016 and shareholders have approved the same at the Annual General Meeting held on August 24, 2016. Accordingly, NSE & BSE have changed the face value of equity shares of the Company w.e.f. October 4, 2016 and consequently equity shares of the company changed from 7,94,69,000 of ''2/- each to 15,89,38,000 of ''1/- each.

E. Consolidation of promoter group Companies

Pursuant to the Composite Scheme of Arrangement approved by the Hon''ble High Court of Punjab & Haryana on April 29, 2016, the erstwhile promoter companies namely, Kajaria Exports Private Limited, Pearl Tile Marketing Private Limited and Cheri Ceramics Private Limited stands merged (''Merged entities'') with another promoter company i.e. Kajaria Securities Private Limited (KSPL). Accordingly, the shareholding of the merged entities in the Company have been transferred to KSPL.

F. Preference share capital

The Company also has authorized preference share capital of 10,00,000 shares (31 March 2016: 10,00,000, 1 April 2015: 10,00,000) of Rs,100 each

2. EMPLOYEE BENEFIT PLANS

Defined Contribution Plans - General Description

Retirement benefits in the form of provident fund, superannuation fund and national pension scheme are defined contribution schemes. The Company has no obligation, other than the contribution payable to the provident fund. The Company''s contribution to the provident fund is Rs,6.02 crores (31 March 2016 Rs,5.74 crores)

Defined Benefit Plans - General Description Gratuity:

The Company has a defined benefit gratuity plan. Gratuity is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to an insurer to provide gratuity benefits by taking a scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance company.

The average duration of the defined benefit plan obligation at the end of the reporting period is 16 years (31 March 2016: 16 years).

3. COMMITMENTS AND CONTINGENCIES

(a) Leases

Operating lease commitments - Company as lessee

The Company has obtained some office premises on operating leases. Few of the leases for office premises are long term and are non- cancelable. Further, there is an escalation clause in the lease agreement.

Lease payments of Rs,13.22 crores (previous year - Rs,10.26 crores) have been recognized as an expense in the statement of profit and loss during the year.

(b) Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs,3.42 crores (March 31, 2016 - Rs,0.88 crores, April 1, 2015 - Rs,8.83 crores).

Letters of Credit opened in favour of inland/overseas suppliers (Net) are Rs,64.71 crores (March 31, 2016 - Rs,64.01 crores, April 1, 2015 - Rs,49.81 crores).

(c) Contingent Liabilities

(i) Counter guarantees issued in respect of guarantees issued by company''s bankers Rs,2.99 crores (March 31, 2016 -Rs,1.01 crores, April 1, 2015 - Rs,1.12 crores)

(ii) Guarantees provided on behalf of subsidiaries Rs,243.23 crores (March 31, 2016 - Rs,209.24 crores, April 1, 2015 -Rs,223.23 crores)

(iii) In respect of VAT, Service Tax & Custom Duty Demands pending before various authorities and in dispute Rs,0.23 crores (March 31, 2016 - Rs,1.45 crores, April 1, 2015 - Rs,0.92 crores)

(iv) In respect of pending income tax demands Rs, Nil (March 31, 2016 - Rs, Nil , April 1, 2015 - Rs,0.18 crores)

(v) In respect of Consumer Cases Rs,1.78 crores (March 31, 2016 - Rs,1.28 crores, April 1, 2015 - Rs,2.02 crores)

4. RELATED PARTY DISCLOSURES

A. List of related parties

(a) Entities substantially owned directly or indirectly by the Company, irrespective of whether transactions have occurred or not:-

1 Soriso Ceramic Private Limited

2 Jaxx Vitrified Private Limited

3 Vennar Ceramics Limited

4 Cosa Ceramics Private Limited

5 Floera Ceramics Private Limited

6 Kajaria Bathware Private Limited

7 Taurus Tiles Private Limited

8 Kajaria Sanitaryware Private Limited (step - subsidiary)

(b) Enterprise owned by Key Management Personnel or major shareholders of the reporting enterprise and enterprises that have a member of key management in common with the reporting enterprise:-

1 Dua Engineering Works Private Limited

2 Malti Devi Kajaria Foundation

3 Kajaria Ceramics Employees Gratuity trust

(c) Key Management Personnel:-

1 Sh. Ashok Kajaria - Chairman & Managing Director

2 Sh. Chetan Kajaria - Joint Managing Director

3 Sh. Rishi Kajaria - Joint Managing Director

4 Sh. D.D. Rishi - Whole Time Director

5 Sh. B.K. Sinha - Whole Time Director

6 Sh. R.K.Bhargava - Independent director

7 Sh. R. R. Bagri - Independent director

8 Sh. D. P. Bagchi - Independent director

9 Sh. H.R. Hegde - Independent director

10 Smt. Susmita Shekhar - Independent director

11 Sh. Ram Chandra Rawat - COO (A&T) & Company Secretary

12 Sh. Sanjeev Agarwal - Chief Financial Officer

5 SEGMENT INFORMATION

According to Ind AS 108, identification of operating segments is based on Chief Operating Decision Maker (CODM) approach for making decisions about allocating resources to the segment and assessing its performance. In Kajaria Ceramics Limited, the decision makers view the operating results internal division wise (Ceramic, Glazed, Polished). Accordingly, such segments may be presented under Ind AS 108. However, these segments have been aggregated because the core principles, economic characteristics, nature of products, production process, distribution method, regulatory environment and type of customers in all the divisions are similar. Hence the disclosure requirement of Ind AS 108 of "Segment Reporting” is not considered applicable.

6. SHARE BASED PAYMENTS

Description of share based payments arrangements

During the year, the Company granted stock options to certain employees of the Company and its subsidiaries. The Company has the following share-based payment arrangements for employees.

Kajaria Ceramics Employee Stock Option Plan 2015 (ESOP 2015)

The ESOP 2015 ("the Plan”) was approved by the Board of Directors and the shareholders on 7th September 2015. The plan entitles employees of the Company and its subsidiaries to purchase shares in the Company at the stipulated exercise price, subject to compliance with vesting conditions. Stock options will be settled by issue of equity shares. As per the Plan, holders of vested options are entitled to purchase one equity share for every option at an exercise price of Rs,850, which is 7.42% below the stock price i.e. Rs,918.10 at the date of grant, i.e., 20th October, 2015.

The management assessed that fair value of short term financial assets and liabilities significantly approximate their carrying amounts largely due to the short term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company determines fair values of fianncial assets or liabilities by discounting the contractual cash inflows / outflows using prevailing interest rates of financial instruments with similar terms. The initial measurement of financial assets and financial liabilities is at fair value. The fair value of investments in mutual funds is determined using quoted net assets value of the funds. Further, the subsequent measurements of all assets and liabilities (other then investments in mutual funds) is at amortised cost, using effective interest rate method.

The following methods and assumptions were used to estimate the fair values:

- The fair value of the Company''s interest bearings borrowings are determined using discount rate that reflects the entity''s discount rate at the end of the reporting period. The own non-performance risk as at the reporting period is assessed to be insignificant.

- The fair value of unquoted instruments and other financial assets and liabilities is estimated by discounting future cash flows using rates using rates currently applicable for debt on similar terms, credit risk and remaining maturities.

Valuation technique used to determine fair value:

Security Deposit and interest free loan: Discounted Cash flow method using risk adjusted discount rate

7. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company''s principal financial liabilities, other than derivatives, comprise , trade and other payables, security deposits, employee liabilities. The Company''s principal financial assets include trade and other receivables, inventories and cash and short-term deposits/ loan that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s management oversees the management of these risks. The Company''s senior management is supported by a Risk Management Compliance Board that advises on financial risks and the appropriate financial risk governance framework for the Company. The financial risk committee provides assurance to the Company''s management that the Company''s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. The management reviews and agrees policies for managing each of these risks, which are summarized below.

I. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. Financial instruments affected by market risk include , deposits.

The sensitivity analyses of the above mentioned risk in the following sections relate to the position as at 31 March 2017 and 31 March 2016.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other postretirement obligations; provisions; and the non-financial assets and liabilities of foreign operations. The analysis for contingent liabilities is provided in Note 34.

The following assumptions have been made in calculating the sensitivity analyses:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 March 2017 and 31 March 2016.

A. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s debt obligations with floating interest rates. However the risk is very low due to negligible borrowings by the Company.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.

B. Foreign currency sensitivity

Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in exchange rates. Foreign currency risk sensitivity is the impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities. The following tables demonstrate the sensitivity to a reasonably possible change in USD and EURO exchange rates, with all other variables held constant.

The movement in the pre-tax effect on profit and loss is a result of a change in the fair value of derivative financial instruments not designated in a hedge relationship and monetary assets and liabilities denominated in INR, where the functional currency of the entity is a currency other than INR.

8. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

II. Credit risk

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

Credit risk from investments with banks and other financial institutions is managed by the Treasury functions in accordance with the management policies. Investments of surplus funds are only made with approved counterparties who meet the appropriate rating and/or other criteria, and are only made within approved limits. The management continually re-assess the Company''s policy and update as required. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty failure.

The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the Balance Sheet date

A. Trade receivables

Customer credit risk is managed by each business unit subject to the Company''s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit review and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored.

At the year end the Company does not have any significant concentrations of bad debt risk other than that disclosed in note 9.

An impairment analysis is performed at each reporting date on an individual basis for major clients. The calculation is based on historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 39. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.

B. Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only with approved counterparties.

III. Liquidity risk

The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts.

The table below summarizes the maturity profile of the Company''s financial liabilities based on contractual undiscounted payments.

* In absolute terms i.e. undiscounted and including current maturity portion

IV. Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry.

The Company''s manufacturing facilities are situated in different geographies. Similarly the distribution network is spread PAN India.

9. CAPITAL MANAGEMENT

The objective of the Company''s capital management structure is to ensure that there remains sufficient liquidity within the Company to carry out committed work programme requirements. The Company monitors the long term cash flow requirements of the business in order to assess the requirement for changes to the capital structure to meet that objective and to maintain flexibility.

The Company manages its capital structure and makes adjustments to it, in light of changes to economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital, issue new shares for cash, repay debt, put in place new debt facilities or undertake other such restructuring activities as appropriate.

10. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, Schedule VII and Companies (Corporate Social Responsibility Policy) Rules,2014, the Company was required to spend Rs,5.19 crores (March 31, 2016: Rs,3.82 crores) for Corporate Social Responsibility activities. The company has incurred CSR expenditure of Rs,3.37 crores during the current financial year (March 31, 2016: Rs,3.59 crores) on the projects/activities for the benefit of the public in general and in the neighborhood of the manufacturing facilities of the company.

11. During the year, the Board of Directors of Kajaria Ceramics Limited (the Company) has approved Scheme of Arrangement, which provides for, inter-alia, the amalgamation of a promoter company i.e. Kajaria Securities Private Limited with the Company with appointed date as closing hours of business on March 31, 2017 ("Scheme”). The Company has filed the Scheme for approval under sections 230-232 and 66 read with other applicable provisions of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 before the Chandigarh Bench of the National Company Law Tribunal ("NCLT”) vide application dated March 16, 2017. Pending approval of the Scheme by NCLT, the management has not given effect to provisions of the proposed Scheme.

Note: Note: Final dividend for FY 2016-17 is proposed on equity shares of face value of Rs,1 per share after share split. All other per share figures are in respect of equity shares of face value of Rs,2 per share. (refer note 13C)

12.FIRST TIME ADOPTION OF IND AS

These financial statements, for the year ended 31 March 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company''s opening balance sheet was prepared as at 1 April 2015, the Company''s date of transition to Ind AS. This note explains exemptions availed by the Company in restating its Previous GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements as at and for the year ended 31 March 2016.

13. FIRST TIME ADOPTION OF IND AS Exemptions applied:

1. Mandatory exceptions;

a) Estimates

The estimates at 1 April 2015 and at 31 March 2016 are consistent with those made for the same dates in accordance with Previous GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Previous GAAP did not require estimation:

- Impairment of financial assets based on expected credit loss model

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2015, the date of transition to Ind AS and as of 31 March 2016.

b) De-recognition of financial assets:

The company has applied the de-recognition requirements in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.

c) Classification and measurement of financial assets:

i. Financial Instruments:

Financial assets like security deposits received and security deposits paid, has been classified and measured at amortized cost on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Since, it is impracticable for the Company to apply retrospectively the effective interest method in Ind AS 109, the fair value of the financial asset or the financial liability at the date of transition to Ind AS by applying amortized cost method, has been considered as the new gross carrying amount of that financial asset or the financial liability at the date of transition to Ind AS.

d Impairment of financial assets: (Trade receivables and other financial assets)

At the date of transition to Ind AS, the Company has determined that there significant increase in credit risk since the initial recognition of a financial instrument would require undue cost or effort, the Company has recognized a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognized (unless that financial instrument is low credit risk at a reporting date).

Optional exemptions;

A. Deemed cost-Previous GAAP carrying amount: (PPE and Intangible)

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

Accordingly, the company has elected to measure all of its property, plant and equipment, intangible assets and investment property at their previous GAAP carrying value

B. Lease:-

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

The company has elected to apply this exemption for such contracts/arrangements.

C. Business combinations:

Ind AS 101 allows a first-time adopter not to apply Ind AS 21 Effects of changes in Foreign Exchange Rates retrospectively for business combinations that occurred before the date of transition to Ind AS. In such cases, where the entity does not apply Ind AS 21 retrospectively to fair value adjustments and goodwill, the entity treats them as assets and liabilities of the acquirer entity and not as the acquire.

The company has elected to apply this exemption.

D. Investment in subsidiaries, jointly controlled entities and associates in Standalone financial statements :

At transition date, entity may choose to account for its investment at:

- Cost as per Ind AS 27 determined at transition date.

- Fair value as per Ind AS 113 (only on transition date).

- Previous GAAP carrying amount.

- Fair value as per Ind AS 109 (recurring fair valuation without recycling).

The company has elected to apply previous GAAP carrying amount exemption.”

E. Share based payments :

A first-time adopter is encouraged, but not required, to apply Ind AS 102 to equity instruments that vested before the date of transition to Ind ASs. If a first-time adopter elects to apply Ind AS 102 to equity instruments that vested before the date of transition to Ind ASs, it may do so only if the entity has disclosed publicly the fair value of those equity instruments, determined at the measurement date as defined in Ind AS 102.

Under Previous GAAP, a company could have used the intrinsic value method or the fair value method. However, Ind AS 102 requires all types of share-based payments and transactions to be measured at fair value and recognized over the vesting period.

However Ind-AS 101 provides that requirements of Ind-AS 102 can be applied to the options that have been vested only if the company has publically disclosed the fair value. For options that have not yet vested as at the transition date the company will need to apply the requirements of Ind-AS 102 retrospectively.

Footnotes to the reconciliation of equity as at 1 April 2015 and 31 March 2016 and profit & loss for the year ended 31 March 2016

1 Security deposits

Under Previous GAAP, the security deposits paid for lease rent are shown at the transaction value whereas under Ind AS, the same are initially discounted and subsequently recorded at amortized cost at the end of every financial reporting period. Accordingly, the difference between the transaction and discounted value of the security deposits paid towards lease rent is recognized as deferred lease expense and is amortized over the period of the lease term. Further, interest is accreted on the present value of the security deposits paid for lease rent.

14 RECONCILIATION OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH 2016 (contd...)

15 Deferred tax assets

Previous GAAP requires deferred tax accounting using the profit and loss account approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the Balance Sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences relating to various transition adjustments which are recognized in correlation to the underlying transaction either in retained earnings as a separate component in equity.

16 Government grant - interest free loan

Under the previous GAAP, interest free loan from the government has been presented in the Balance Sheet by showing it as a part of borrowings, Government grants related to assets, including non-monetary grants at fair value, are required to be presented in the balance sheet by setting up the grant as deferred income in the liability side of balance sheet. The grant set up as deferred income is recognized in profit & loss on a systematic basis over the useful life of the asset. Accordingly, unamortized government grants till transition date is recognized as deferred government grant and is amortized.

17 Expected credit loss model

Under the previous GAAP, provision for bad debt was recognized for the doubtful debtors on a case to case basis. However, under Ind AS, the Company assesses impairment based on expected credit losses (ECL) model for measurement and recognition of impairment loss on the financial assets that are trade receivables accounting for both nonpayment and delay of receivable. According to the past estimates, the Company has recognized 0.1% of good debtors as the additional provision under ECL model.

Footnotes to the reconciliation of profit & loss for the year ended 31 March 2016

18 Sale of goods

Under Previous GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is separately presented on the face of statement of profit and loss. Thus sale of goods under Ind AS has increased with a corresponding increase in other expense. There is, however, no impact on profit for the year on account of the same.

19 Other operating income :Sale of power from windmill

Under Previous GAAP, the windmill rental received from Maharashtra State Electricity Distribution Corporation was recognized as income in the respective period. However, as per the arrangement contains a lease within the scope of Ind AS 17. An asset (the facility) is explicitly identified in the arrangement and fulfillment of the arrangement is dependent on the facility. Therefore, the management has estimated an amount of 5% of WDV as the rental income from finance lease.

20 Other income

Security Deposit Interest unwinding- Interest on present value of security deposit is recognized as income at the average borrowing rate for the corresponding period. Impact of the same is ''0.42 Crore.

21 Finance expense

Interest expense on interest free government loan has been recognized at the average borrowing rate of the Company. Additional interest expense amounting to ''0.0008 crore has been recognized for the year ended 31 March 2016

22 Rent expense

Rent expense: Differed lease expense has been recognized on a straight line basis over the life of security deposits for the term of the deposit. Impact Rs,0.40 Crore for FY ended 31 March 2016.

23 Defined benefit liabilities

Both under Previous GAAP and Ind AS, the company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gains and losses, are charged to profit & loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.

24 Share-based payments

Under Previous GAAP, the Company recognized only the intrinsic value for the long-term incentive plan as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period. An additional expense of Rs,0.66 crore has been recognized in profit & loss for the year ended 31 March 2016.

25 ECL for trade receivables

Under the previous GAAP, provision for bad debt was recognized for the doubtful debtors on a case to case basis. However, under Ind AS, the Company assesses impairment based on expected credit losses (ECL) model for measurement and recognition of impairment loss on the financial assets that are trade receivables accounting for both nonpayment and delay of receivable. According to the past estimates, the Company has recognized 0.1% of good debtors as the additional provision under ECL model. Impact on trade receivables due to extra provision is Rs,0.06 crore.

26 Other comprehensive income

Under Previous GAAP, the company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Previous GAAP profit & loss to profit or profit & loss as per Ind AS. Further, Previous GAAP profit & loss is reconciled to total comprehensive income as per Ind AS.

27 Re-classification

The company has reclassified previous year figures to conform to Ind AS classification.


Mar 31, 2015

Note No:1

CONTINGENT LIABILITIES (Rs. in crore)

Particulars As at As at 31.03.2015 31.03.2014

(excluding matters separately dealt with in other notes):

a) In respect of Bills discounted With the Company's Bankers 8.29 3.79

b) Counter guarantees issued in respect of guarantees issued by company's bankers 1.12 0.05

c) Guarantees issued on behalf of subsidiaries 223.23 145.75

d) In respect of Excise Duty, VAT, Service Tax, Entry Tax & Custom Duty Demands pending before 0.92 9.46 various authorities and in dispute

e) In respect of pending income tax demands 0.18 0.72

f) In respect of Consumer Cases 2.02 2.52

Note No:2

As per policy of the Company for Directors and other senior employees, the Company has, during the year, paid a sum of Rs. 0.5 Crores on account of insurance premium under the employer employee policy obtained on the life of key directors and the same lies debited under the head 'Insurance Charges'. The policy may be assigned in the name of the insured in future. In such an event of assignment of the policy, the same shall be treated as perquisite in the hands of the key personnel.

Note No:3

Balances of certain debtors, creditors, loans and advances are subject to confirmation.

Note No:4

In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

Note No:5

A demand of Rs. 5.74 Crores for entry tax relating to earlier years was outstanding as on 31st March, 2014 and Rs. 2.87 Crores, paid against the same was shown under current assets, since the Company was contesting the demand raised by the department. In the current year, the Rajasthan state government announced an amnesty scheme offering waiver of interest and penalty. The Company decided to settle the demand under the scheme by paying a further Rs. 2.87 Crores. Accordingly, the total amount of Rs. 5.74 crores has been charged to the statement of profit and loss and shown under the head 'exceptional items'.

Note No:6

To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to Rs. 21.12 Crores (previous year 13.53 Crores) has been included in the value of inventories as on 31.03.2015 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

Note No:7

GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance company.

Note No:8

Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year. a) Current Year Charge:

Income Tax provision of Rs. 72.00 Crores has been made on regular income.

Note No:9

RELATED PARTY DISCLOSURES

In accordance with the Accounting Standards (AS-18) on Related Party Disclosures, where control exists and where key management personnel are able to exercise significant influence and, where transactions have taken place during the year, alongwith description of relationship as identified, are given below:- A. Relationships

I. Key Management Personnel

Name Designation

Mr. Ashok Kumar Kajaria Chairman & Managing Director

Mr. Chetan Kajaria Joint Managing Director

Mr. Rishi Kajaria Joint Managing Director

Mr. Dev Datt Rishi Director Technical

Mr. Basant Kumar Sinha Director Technical

II. Relatives of Key Smt. Versha Devi Kajaria Management Personnel

III. Subsidiaries & Step Soriso Ceramic Pvt Ltd Subsidiaries: Jaxx Vitrified Pvt Ltd

Cosa Ceramics Pvt Ltd

Vennar Ceramics Limited

Taurus Tiles Pvt Ltd

Kajaria Ceramics Kazakhstan LLP

Kajaria Bathwares Pvt. Ltd

Kajaria Sanitaryware Pvt. Ltd

IV. Enterprises over Dua Engineering Works Pvt Ltd which key management personnel or their relatives are able to exercise significant influence Malti Devi Kajaria Foundation

Note No:10

SEGMENTAL REPORTING

The business activity of the company falls within one broad business segment viz "Ceramic/ Vitrified Tiles" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

Note No:11

Depreciation and Amortization on tangible and intangible fixed assets: the Company was hitherto charging depreciation on Straight Line Method at the rates provided in Schedule XIV of the Companies Act, 1956. In the current year, the Company has reassessed the useful life of assets, and adopted the useful life as provided in Schedule II of the Companies Act, 2013 except in the following cases:

Particulars Depreciation

Continuous process plant & machinery Useful life of 18 years taken on the basis of technical evaluation

Software Useful life of 6 years taken on the basis of internal evaluation

Fit-out and other assets at sales outlets Useful life of 5 years taken on the basis of internal evaluation

Consequent to change of useful life as above, an amount of Rs. 0.66 crores (net of deferred tax Rs. 0.34 crores) representing WDV of those assets whose useful life had already expired as on 1st April, 2014 has been adjusted against the general reserve.

Had there been no change, depreciation charge for the year would have been higher by Rs. 0.32 crores and profit for the year would have been lower by Rs. 0.32 crores.

Note No:12

As per Section 135 of the Companies Act, 2013, Schedule VII and Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company was required to spend Rs. 2.92 crores for CSR activities. The company has incurred CSR expenditure of Rs. 1.09 crore during the current financial year and is in process of identifying the projects/activities for the benefit of the Public in general and in the neighborhood of the manufacturing facilities in the best possible manner into various projects for future.

Note No:13

The company has reclassified previous year figures to conform to this year's classification.


Mar 31, 2014

As At As at 31.03.2014 31.03.2013 Rs. in Rs. in million million

1. CONTINGENT LIABILITIES

(excluding matters separately dealt with in other notes):

a) In respect of Bills discounted With the Company''s Bankers 37.86 7372

b) Counter guarantees issued in respect of guarantees issued by company''s bankers 0.50 Nil

c) Guarantees issued on behalf of subsidiaries 1457.50 299.00

d) In respect of Excise Duty, Sales Tax, Service Tax, Custom Duty Demands pending before various authorities and in dispute 94.56 57.11

e) In respect of pending income tax demands 7.22 -

f) In respect of Consumer Cases 25.21 16.00

g) In respect of disputed Electricity Demand pending with appellate authorities. - 9.41

2. As per policy of the Company for Directors and other senior employees, the Company has, during the year, paid a sum of Rs.5 million on account of insurance premium under the employer employee policy obtained on the life of key directors and the same lies debited under the head ''Insurance Charges''. The policy may be assigned in the name of the insured in future. In such an event of assignment of the policy, the same shall be treated as perquisite in the hands of the key personnel.

3. Balances of certain debtors, creditors, loans and advances are subject to confirmation.

4. In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

5. The Company was setting up a ceramic tile unit in Ethiopia and accordingly, had incorporated a subsidiary, Kajaria Ceramics Addis Plc. in Ethiopia. The Company had invested an amount of Rs.30.3 million in the subsidiary by way of Equity and Advances. Due to adverse change in the business environment, the Company had abandoned the project and created a provision of Rs.30.3 million towards the loss of investment in the subsidiary in the previous year. Pursuant to resolution passed in the meeting of board of directors in the current year, the amount has been written off. Necessary formalities for obtaining regulatory permission from RBI are underway. Since full provision was created in the previous year, the write off has no impact on current year profits.

6. To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to Rs.124.43 million (previous year Rs.135.34 million) has been included in the value of inventories as on 31.03.2014 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

7. Gratuity And Other Post-Employment Benefit Plans:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance company.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognized in the balance sheet for the plan:

8. Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year.

a) Current Year Charge:

Income Tax provision of 546.70 million has been made on regular income.

II. Relatives of Key Management Personnel

Smt. Versha Devi Kajaria

III. Subsidiary Companies Soriso Ceramic Pvt. Ltd.

Jaxx Vitrified Pvt. Ltd.

Cosa Ceramics Pvt. Ltd.

Vennar Ceramics Limited

Kajaria Sanitary ware Pvt. Ltd.

IV. Enterprises over which key management personnel or their relatives are able to exercise significant influence

Kajaria Infrastructure Ltd.

Dua Engineering Works Pvt. Ltd.

Malti Devi Kajaria Charitable Trust

9. Segmental Reporting:

The business activity of the Company falls within one broad business segment viz "Ceramic Tiles" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

10. Share Warrants:

The Company had, in its EOGM dated 6th November, 2013 approved the issuance of 3885420 warrants to M/s. West Bridge Crossover Fund LLC and as per terms of issue, 25% of the total consideration, amounting to Rs.250 million has been received during the year. Each warrant is convertible into one equity share of Rs.2/- each at a premium of Rs.255.372433 per share as per SEBI (ICDR) regulations, 2009 for Preferential issues, within one year from the date of allotment, i.e., 11th November, 2013.

11. The Company has reclassified previous year figures to conform to this year''s classification


Mar 31, 2013

1. Term loans from Banks are secured by 1st charge on immovable and movable assets (present and future) of the Company situated at Sikandrabad Industrial Area (U P) and Village Gailpur (Rajasthan) (subject to prior charges on movables in favour of banks) ranking pari- pasu with the charges created in favour of participating Banks and further guaranteed by the Managing Director of the Company.

2. Loan from others parties are secured against respective assets financed.

3. The term loans are repayable generally over a period of three to five years after a moratorium period of one to two years in installments as per the terms of the respective agreements.

4. As per policy of the Company for Directors and other senior employees, the Company has, during the year, paid a sum of Rs.50 lacs on account of insurance premium under the employer employee policy obtained on the life of key directors and the same lies debited under the head ''Insurance Charges''. The policy may be assigned in the name of the insured in future. In such an event of assignment of the policy, the same shall be treated as perquisite in the hands of the key personnel.

5. Balances of certain debtors, creditors, loans and advances are subject to confirmation.

6. In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

7. The Company had planned to put up a ceramic tile unit in Ethiopia and accordingly incorporated a subsidiary, Kajaria Ceramics Addis Plc. The Company had invested an amount of Rs.30.3 Million in the subsidiary by way of Equity and Advances. Due to adverse change in the business environment, the Company has decided to abandon the project and take steps for dissolution of the subsidiary.

Accordingly, a provision of Rs.30.3 Million has been made towards the loss of investment in the subsidiary.

8. To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to Rs.135.34 Million (previous year 91.72 Million) has been included in the value of inventories as on 31.03.2013 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

9. Gratuity And Other Post-Employment Benefit Plans:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/ liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance company.

The following tables summarize the components of net benefit expense recognized in the profit and loss account and the funded status and amounts recognized in the balance sheet for the plan:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

On consideration of materiality, the entire liability has been classified as a ''noncurrent liability''.

10. Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year.

a) Current Year Charge:

Income Tax provision of Rs.451.40 Million has been made on regular income.

b) Deferred Tax

The Company estimates the deferred tax charge using the applicable rate of taxation based on the impact of timing differences between financial statements and estimated taxable income for the current year. The movement of provision for deferred tax is given below:

11. Related Party Disclosures:

In accordance with the Accounting Standards (AS-18) on Related Party Disclosures, where control exists and where key management personnel are able to exercise significant influence and, where transactions have taken place during the year, alongwith description of relationship as identified, are given below:-

II. Associates/Enterprises over which key management personnel or their relatives are able to exercise significant influence

Kajaria Infrastructure Ltd

Kajaria Exports Ltd

Dua Engineering Works Pvt Ltd

MaLti Devi Kajaria Charitable Trust

III. Subsidiary Companies : Soriso Ceramic Pvt Ltd

Jaxx itriftfed Pvt Ltd

Vennar eramics imitled Cosa Ceramics Pvt Ltd

Kajaria Ceramics Addis Plc

12. Segmental Reporting:

The business activity of the company falls within one broad business segment viz "Ceramic Tiles" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

13. Earnings per share (EPS) - The numerators and denominators used to calculate Basic and Diluted Earning per share:

14. Previous year figures have been regrouped / recast wherever necessary.


Mar 31, 2012

1. Term loans from Financial Institutions & Banks are secured by 1st charge on immovable and movable assets (present and future) of the Company situated at Sikandrabad Industrial Area (U P) and village Gailpur (Rajasthan) (subject to prior charges on movables in favour of Banks) ranking pari-passu with the charges created in favour of participating Financial Institutions and Banks and further guaranteed by the Managing Director of the Company.

2. Loan from others parties are secured against respective assets financed.

3. There has been no continuing default on the Balance Sheet date in repayment of loan and interest.

4. The term loans are repayable generally over a period of three to five years after a moratarium period of one to two years in installments as per the terms of the respective agreements.

1. Contingent Liabilities

(Rs in million)

As at As at 31.03.2012 31.03.2011

(excluding matters separately dealt with in other notes):

a. In respect of Bills discounted with the Company's Bankers 21.13 34.23

b. Counter guarantees issued in respect of guarantees issued by company's bankers 0.50 8.76

c. Guarantees issued on behalf of limited companies 90.00 50.00

d. In respect of Excise Duty, Sales Tax, Service Tax, Custom Duty Demands pending before various authorities and in dispute 64.48 60.12

e. In respect of disputed Electricity Demand pending with Appellate Authorities and other consumer cases. 16.67 4.68

# The details of amounts outstanding to Micro, Small and Medium Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 are as per available information with the Company.

2. As per policy of the Company for Directors and other senior employees, the Company has, during the year, paid a sum of Rs 50 lacs on account of insurance premium under the employer employee policy obtained on the life of key directors and the same lies debited under the head 'Insurance Charges'. The policy may be assigned in the name of the insured in future. In such an event of assignment of the policy, the same shall be treated as perquisite in the hands of the key personnel.

3. Balances of certain debtors, creditors, loans and advances are subject to confirmation.

4. In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

5. To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to Rs 91-72 million (previous year Rs 56.55 million) has been included in the value of inventories as on 31st March 2012 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

6. Gratuity and Other Post-Employment Benefit Plans:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance Company.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the Balance Sheet for the plan:

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

On consideration of materiality, the entire liability has been classified as a 'non current liability'.

7. Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year, a) Current Year Charge:

Income Tax provision of Rs 320 million has been made on regular income.

II. Associates/Enterprises over which key management personnel are able to exercise significant influence:

Kajaria Infrastructure Ltd Kajaria Exports Ltd Dua Engineering Works Pvt Ltd Malti Devi Kajaria Charitable Trust

III. Subsidiary Companies Soriso Ceramic Pvt Ltd Jaxx Vitrified Pvt Ltd Kajaria Ceramics Addis Pic

8. Segmental Reporting:

The business activity of the Company falls within one broad business segment viz "Ceramic Tiles" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

9. Previous year figures have been regrouped / recast wherever necessary.


Mar 31, 2011

(Rs. in million)

As at As at 31.03.2011 31.03.2010

1. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) 3.96 136.41

2. Letters of Credit opened in favour of inland/overseas suppliers (Net) 1623.52 942.42

3. Contingent Liabilities not provided for (excluding matters separately dealt with in the notes):

a) In respect of Bills discounted With the Companys Bankers 34.23 72.48

b) Counter guarantees issued in respect of guarantees issued by Companys bankers 8.76 29.69

c) Guarantees issued on behalf of limited Companies 50.00 50.00

d) In respect of Excise Duty, Sales Tax, Service Tax, Custom Duty demands pending before various authorities and in dispute 60.12 57.88

e) Export Obligation under EPCG scheme -- 2.69

f) In respect of disputed Electricity demand pending with Appellate Authorities and other consumer cases. 4.68 4.54

4. As per policy of the Company for Directors and other senior employees the Company has, during the year, paid a sum of Rs.50 lacs on account of insurance premium under the employer employee policy obtained on the life of key Directors and the same lies debited under the head Insurance Charges. The policy may be assigned in the name of the insured in future. In such an event of assignment of the policy, the same shall be treated as perquisite in the hands of the key personnel.

5. Balances of certain debtors, creditors, loans and advances are subject to confirmation.

6. In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

7. To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to Rs.56.55 million (previous year Rs.75.11 million) has been included in the value of inventories as on 31.03.2011 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

8. a) Reference is invited to note no. 18 on the accounts of the Company for the financial year ended 31.3.2010. A sum of Rs.103.37 million has been debited to the Profit & Loss Account under the head Sales Tax of Earlier Years, representing sales tax paid as a result of withdrawal of exemption by sales tax department in respect of three expansions undertaken by the Company. After getting no favourable outcome, the Company, based on legal opinion, has withdrawn the claims filed in earlier years and accordingly the amount paid has been written off in the Profit & Loss Account.

b) Since the liability relates to earlier years, an equivalent amount has been withdrawn from General Reserve and credited to Profit & Loss Account.

9. Gratuity And Other Post-Employment Benefit Plans:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance Company.

The following tables summarize the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the Balance Sheet for the plan:

10. Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year. a) Current Year Charge:

Income Tax provision of Rs.218.40 million has been made on regular income.

11. Related Party Disclosures:

In accordance with the Accounting Standards (AS-18) on Related Party Disclosures, where control exists and where key management personnel are able to exercise significant influence and, where transactions have taken place during the year, alongwith description of relationship as identified, are given below:- A. Relationships

I. Key Management Personnel:

Name Designation

Sh. Ashok Kajaria Chairman & Managing Director

Sh. Chetan Kajaria Joint Managing Director

Sh. Rishi Kajaria Joint Managing Director

Sh. B.K. Sinha Director Technical

II. Relatives of Key Management Personnel: Smt. Versha Devi Kajaria Sh. A.K. Kajaria (HUF)

III. Associates/Enterprises over which key management personnel are able to exercise significant influence:

Kajaria Plus Pvt Ltd Kajaria Vision Pvt Ltd Dua Engineering Works Pvt Ltd

IV. Subsidiary Company Soriso Ceramic Pvt Ltd

12. Segmental Reporting:

The business activity of the Company falls within one broad business segment viz "Ceramic Tiles" and substantially sale of the product is within the country. The Gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

13. Previous year figures have been regrouped / recast wherever necessary.


Mar 31, 2010

1. Employee Benefits:

a) Short term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the related service is rendered.

b) Gratuity liability has been provided on the basis of actuarial valuation.

2. Research & Development:

Revenue Expenditure on research and development is charged to Profit & Loss Account in the year in which it is incurred. Capital Expenditure on research and development is treated as additions to Fixed Assets in case the same qualifies as an intangible asset as per AS – 26 issued as ICAI.

3. Provision, Contingent Liabilities and Contingent Assets:

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognised but are disclosed in the notes. Contingent assets are neither recognised nor disclosed in the financial statements.

4. Sundry Debtors:

Sundry Debtors are shown net of bills discounted.

5. Dividend received is accounted for as and when it is declared.

6. Unless specifically stated to be otherwise, these policies are consistently followed.

7. No provision for decline in the value of quoted long term investments has been made. It is considered that this decline is of a temporary nature and the net worth of the investee Company does not warrant any such provision.

8. Balances of certain debtors, creditors, loans and advances are subject to confirmation.

9. In the opinion of the Management current assets, loans and advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated except where indicated otherwise.

10. To comply with the guidance note on "Accounting Treatment of Excise Duty" issued by Institute of Chartered Accountants of India, excise duty amounting to 75.11 million has been included in the value of inventories as on 31st March, 2010 and the corresponding amount of Excise Duty payable has been included in other liabilities. However, this accounting policy has no impact on the profit for the year.

11. The Sales Tax Department of Uttar Pradesh had demanded a sum of 155.00 million in earlier years representing the amount of sales tax payable as a result of withdrawal of exemption by the aforesaid department in respect of three expansions undertaken by the Company at its Sikandrabad unit. The withdrawal of exemption was further confirmed by the Honble Supreme Court of India. The Company had provided a sum of 51.70 million towards the same in its accounts for the year ended 31st March, 2006. A further sum of 103.37 million, paid under protest in subsequent years has been shown as amount recoverable. The amount of additional liability is contested before Hon’ble Allahabad High Court and/or Trade Tax Tribunal. On the basis of the opinion given by the law department of the Uttar Pradesh Government, and other legal opinion received, the Company is confident of getting the refund of extra amount paid and as such, no provision for the same has been made in the current financial statements.

12. Gratuity And Other Post-Employment Benefit Plans:

The Company has a defined benefit gratuity plan. Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement / termination / resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions are deposited to a Gratuity Trust Fund established to provide gratuity benefits. The Trust Fund has taken a Scheme of Insurance, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/liability in the books of accounts on the basis of actuarial valuation as per the Projected unit credit method. Plan assets also include investments and bank balances used to deposit premiums until due to the insurance Company.

The following tables summarise the components of net benefit expense recognised in the Profit and Loss Account and the funded status and amounts recognised in the Balance Sheet for the plan:

13. Tax Expense is the aggregate of current year income tax and deferred tax charged to the Profit and Loss Account for the year.

a) Current Year Charge:

Income Tax provision of ` 130 million has been made on regular income after adjusting MAT credit available from earlier years.

b) Deferred Tax:

The Company estimates the deferred tax charge using the applicable rate of taxation based on the impact of timing differences between financial statements and estimated taxable income for the current year. The movement of provision for deferred tax is given below: (in Million)

14. Related Party Disclosures:

In accordance with the Accounting Standards (AS-18) on Related Party Disclosures, where control exists and where key management personnel are able to exercise significant influence and, where transactions have taken place during the year, alongwith description of relationship as identified, are given below:

II. Relatives of Key Management Personnel: Smt. Versha Devi Kajaria

Sh. A.K. Kajaria (HUF)

III. Associates/Enterprises over which key management personnel are able to exercise significant influence: Kajaria Plus Pvt Limited

M/s Sudarshan Rishi

Kajaria Home Solutions Pvt Ltd

Kajaria Exports Ltd (Kajaria Infrastructure)

Kajaria Securities Pvt Ltd

Dua Engineering Works Pvt Ltd

15. Segmental Reporting:

The business activity of the Company falls within one broad business segment viz "Ceramic Tiles" and substantially sale of the product is within the country. The gross income and profit from the other segment is below the norms prescribed in AS-17 of The Institute of Chartered Accountants of India. Hence the disclosure requirement of Accounting Standard 17 of "Segment Reporting" issued by the Institute of Chartered Accountants of India is not considered applicable.

16. Pre-operative expenses capitalised to fixed assets:

Pre-operative Expenses incurred & capitalised in New Projects during the year are as under: (in Million)

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