Notes to Accounts of Walchandnagar Industries Ltd.

Mar 31, 2018

1. CORPORATE INFORMATION :

Walchandnagar Industries Limited “(the Company)” is a limited company incorporated and domiciled in India whose shares are publicly traded. The registered office is located at 3, Walchand Terraces, Tardeo Road, Mumbai - 400 034, Maharashtra, India.

The Company is an ISO 9001:2008 certified Heavy Engineering and Project execution company. The Company has diversified business offerings across core sectors with focus on EPC / Turnkey Projects, Hi Tech Manufacturing, Engineering Products and Engineering Services.

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorises for issue on May 28, 2018.

Terms/Rights attached to equity shares

The Company has only one class of equity shares having a par value of ‘2 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts.

The distribution will be in proportion to the number of shares held by the shareholders.

As per the records of the company, including its register of shareholders/members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

ii) They are secured by:

1) First charge on specified land and buildings at Walchandnagar, Mumbai and Dharwad.

2) First charge by way of pledge of shareholdings of promoters/affiliates amounting to 53.99% of paid-up capital of the company.

3) First charge on the designated bank account held with State Bank of India.

(B) Corporate loans from State Bank of India and Bank of India outstanding on March 31, 2017 and April 1, 2016 have been repaid in full. The securities charged for the corporate loans have now been transferred to the working capital loans.

(C) Vehicle Loan from Axis Bank - Secured by vehicle bought under loan and repayable in 48 Equated monthly installments of Rs. 0.26 Lakhs and interest @ 11% p.a. Balance instalments payable on balance sheet date are 23.

(D) Other borrowing pertains to Acceptances. In case of HED division they are secured by mortgage of residential flat in Mumbai, specified land and building situated at Walchandnagar and by way of charge on all movable plant and machinery, fixtures, implements, fittings, furniture, current assets (both present & future) including stock-in-trade, raw material, semi-finished and finished products, stores and spares, book debts, tools and accessories and other movables of and pertaining to Heavy Engineering Division at Walchandnagar. Further secured by second charge on all the assets given to KKR India and charge on Residual from sales of Shares pledged to KKR India.

Acceptances for Foundry, Satara are secured by hypothecation of all those tangible movable properties and assets, including all stocks of Raw Material, Components, Tools, Stores Materials, Work-in-Progress, Finished Goods and Book Debts and equitable mortgage on fixed assets of Foundry Division at Satara Road.

The above are at an interest rate of 15.05% from Bank of India and 15.85% from State Bank of India.

The facilities mentioned at a(i) & a(ii) above peratining to HED division are secured by mortgage of residential flat in Mumbai, specified land and building situated at Walchandnagar and by way of charge on all movable plant and machinery, fixtures, implements, fittings, furniture, current assets (both present & future) including stock-in-trade, raw material, semi-finished and finished products, stores and spares, book debts, tools and accessories and other movables of and pertaining to Heavy Engineering Division at Walchandnagar. Further secured by second charge on all the assets given to KKR India and charge on Residual from sales of Shares pledged to KKR India.

The facilities mentioned at a(i) & a(ii) above peratining to Foundry division,Satara are secured by hypothecation of all those tangible movable properties and assets, including all stocks of Raw Material, Components, Tools, Stores Materials, Work-in-Progress, Finished Goods and Book Debts and equitable mortgage on fixed assets of Foundry Division at Satara Road.

The secured working capital loan from IndusInd bank secured by mortgage of Mahim property has been repaid on September 16, 2017.

Unsecured loans from Citibank, Walchand Great Achievers Pvt. Ltd. and Walchand Kamdhenu Commercials Pvt. Ltd. have been fully repaid on September 16, 2017.

2 FIRST TIME ADOPTION OF IND AS:

The Company has prepared its first Indian Accounting Standards (Ind AS) compliant Financial Statements for the periods commencing April 1, 2017 with restated comparative figures for the year ended March 31, 2017 in compliance with Ind AS. The company has prepared these financial statements in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013. Accordingly, the Opening Balance Sheet, in line with Ind AS transitional provisions, has been prepared as at April 1, 2016, the date of company’s transition to Ind AS. In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard, the Company has presented a reconciliation from the presentation of financial statements under Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (“Previous GAAP”) to equity under Ind AS at March 31, 2017 and April 1, 2016 and to the total comprehensive income for the year ended March 31, 2017. The principal adjustments made by the Company in restating its previous GAAP financial statements as at and for year ended March 31, 2017and the balance sheet as at April 1, 2016 are as mentioned 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 applied the following material exemptions:

1. The estimates as at April 1, 2016 and as at March 31, 2017 are consistent with those made for the same dates in accordance with previous GAAP after adjustments to reflect any differences in accounting policies.

2. Appendix C to IND AS 17 requires the Company 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. However, the Company has used Ind AS 101 exemption and assessed all relevant arrangements for leases based on conditions in place as at the date of transition.

3. In accordance with the exemption given in IND AS 101, the Company has recorded investment in associate at deemed cost i.e. Previous GAAP carrying amount, as on date of transition.

4. The Company has elected to avail exemption under Ind AS 101 to use previous GAAP carrying value as deemed cost at the date of transition for all items of Property, plant and equipment, Intangible Assets and Capital work in progress as per the balance sheet prepared in accordance with previous GAAP.

Notes to reconciliation between previous GAAP and Ind AS:

i. Under Indian GAAP, the Creditors for Capital Goods were not fair valued. Under Ind AS, such loans are subject to fair valued on transition date and every subsequent payments. Effect of fair valuation measurements are recognised to statement of profit and loss.

ii. The Company recognises costs related to its post-employment defined benefit plan on an actuarial basis both under Indian GAAP and Ind AS. Under Indian GAAP, the entire cost including actuarial gains and losses are charged to profit or loss. Under Ind AS, remeasurements are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI.

iii. In accordance with Ind AS 12, ‘Income Taxes’, the Company on transition to Ind AS has recognised deferred tax on temporary differences, i.e. based on balance sheet approach as compared to the earlier approach of recognising deferred taxes on timing differences , i.e. profit and loss approach. The tax impacts as above primarily represent deferred tax consequences arising out of Ind AS re measurement changes.

iv. Under Ind AS, all items ofincome and expense recognised during the year are included in the profit or loss for the year, unless Ind AS requires orpermits otherwise. Items that arenotrecognised in profit orlossbut are showninthestandalone statement of profit and loss and other comprehensive income include re-measurements gains or losses on defined benefit plans. The concept of other comprehensive income did not exist under the previous GAAP.

3. DETAILS OF THE INVESTMENT PROPERTY AND ITS FAIR VALUE :

The fair value of the Company’s investment properties as at March 31, 2018, March 31, 2017, and April 1, 2016 have been arrived at on the basis of a valuation carried out as of the respective dates by an independent valuer. In estimating the fair value of the properties, the highest and best use of the properties is their current use.

The fair value was derived using:

* market comparable approach based on recent market prices without any significant adjustments being made to the market observable data.

* capitalization of net income method, where the market rentals of all lettable units of the properties are assessed by reference to the rentals achieved in the lettable units as well as other lettings of similar properties in the neighborhood. The capitalisation rate adopted is made by reference to the yield rates observed by the valuers for similar properties in the locality and adjusted based on the valuers’ knowledge of the factors specific to the respective properties.

4. FINANCIAL INSTRUMENTS AND RISK REVIEW

Financial Risk Management Framework

The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit, liquidity, which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

Credit Risk

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, unbilled revenue, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ‘47,124.86 lakhs, Rs. 45,945.41 Lakhs and Rs. 47,222.59 Lakhs as of March 31, 2018, March 31, 2017 and April 1, 2016 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, unbilled revenue and other financial assets. In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.

Trade receivables

IND AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. Company’s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2018, March 31, 2017 and April 1, 2016. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.

The expected credit loss allowance is based on the receivables bifurcated based on the division to which they pertain and the rates as given in the provision matrix. The provision matrix at the end of the reporting period is as follows.

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income 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 respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, ZAR against the respective functional currencies of Walchandnagar Industries Limited.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. Based on materiality the Company does not hedge any assets.

The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 10% against the respective functional currencies of Walchandnagar Industries Limited.

The carrying amounts of the Company’s foreign currency denominated financial assets and financial liabilities at the end of the reporting period are as follows:

Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.

The tax rate used for the above reconciliations are the rates as applicable for the respective periods payable by corporate entities in India on taxable profits under the India tax laws.

5. RELATED PARTY DISCLOSURES

Related party disclosures as required under Ind AS 24 (Related Party Disclosures), specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 are given below:

@ employment benefits comprising gratuity, and compensated absences are not disclosed as these are determined for the Company as a whole.

6. FAIR VALUE MEASUREMENTS

Details of transactions relating to the individuals / enterprises referred to in item (i), (ii) and (iii) above are as follows. The same are in the ordinary course of business.

(i) Fair value hierarchy:

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are

(a) recognised and measured at fair value, and

(b) measured at amortised cost and for which fair values are disclosed in the financial statements.

To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments and mutual funds that have quoted price. The fair value of all equity instruments (including bonds) which are traded in the stock exchange is valued using the closing price as at the reporting period.

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

Level 3: If one or more of the significant inputs is not based on observable data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets.

7. DISCLOSURE PURSUANT TO IND AS 19 “EMPLOYEE BENEFITS”

(i) Defined Contribution Plan

The Company makes contributions to Provident Fund and Superannuation Fund which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds. The Company recognized expense in the Statement of Profit and Loss amounting to:

- Rs. 409.14 Lakhs (March 31, 2017: Rs. 453.25 Lakhs) for Provident Fund contributions,

- Rs. (4.50) Lakhs (March 31, 2017: Rs. 51.06 Lakhs) for Superannuation Fund contributions.

The contributions to these plans are made at specified percentage/applicable amounts.

Contributions to defined contribution plans for key management personnel have been disclosed as per Note No-46

(ii) Defined Benefit Plan

The defined benefit plan comprises of gratuity. The gratuity plan is funded. Changes in the present value of Defined Benefit Obligation (DBO) are representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable recognized in the Balance Sheet is as under:

The sensitivity results above determine their individual impact on Plan’s end of year Defined Benefit Obligation. In reality, the plan is subject to multiple external experience items which may move the defined Benefit Obligation in similar or opposite directions, while the Plan’s sensitivity to such changes can vary over time.

8. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Claims against the company not acknowledged as debt

(a) Demand of Non Agricultural (NA) Tax of Rs. 161.37 lakhs is raised by Tahshildar, Indapur (Previous year Rs. 161.37 lakhs) out of which Rs. 20 lakhs is paid under protest by the company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of Annual Rateable Value of Property at Pune, amounting to Rs. 89.32 lakhs (for the period April 1, 2008 to March 31, 2017) was raised by the local authorities (Previous year Rs. 89.32 lakhs). No provision has been made in the books of accounts. The Company has not accepted the liability and the same is sub-judice.

(c) The Sales Tax Authority, Maharashtra has raised demand of Rs. 159.83 lakhs (Previous Year Rs. 159.83 lakhs) as per section 6(2) of the Central Sales Tax Act,1956. The Company has disputed the demand and has preferred an appeal before The Sales Tax Appellate Commissioner. Company has paid Rs. 30.00 lakhs under protests (included under the head loans and advances). There is another demand received post March 31, 2018 of Rs. 1,080.53 lakhs, for which the company will be filing an appeal. On the basis of legal opinion the Company does not expect any liability.

(d) The Customs Authorities, Chennai have raised demand of Rs. 64.50 lakhs (Previous Year Rs. 64.50 lakhs). Company has disputed the demand and has preferred an appeal before Madras High Court. On the basis of legal opinion the Company does not expect any liability.

(e) The Service Tax Authorities, Shillong have raised demand of Rs. 362.65 lakhs on sale of bought out items. The company has discharged liability of Rs. 28.76 lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(f) The Central Excise Authorities have raised a demand of Rs. 377.84 lakhs (Previous Year Rs. 377.84 lakhs) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The company has paid Rs. 111.64 lakhs under protest and has preferred an appeal which is pending before CESTAT, Mumbai and before Supreme Court. On the basis of legal opinion, the Company does not accept any liability.

(g) The Central Excise Authorities have raised various demands pertaining to various years of Rs. 188.95 lakhs (Previous Year Rs. 188.95 lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers’ end. The Company has disputed the demands and has preferred appeals which ares pending before the CESTAT Tribunal / Supreme court. Company has discharged a liability of Rs. 29.53 lakhs by reversal of CENVAT availed and paid Rs. 10 lakhs under protest (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(h) The Central Excise Authorities have raised demand of Rs. 2.47 lakhs (Previous Year ‘2.47 lakhs) on bought out items supplier for centrifugals, which has already suffered duty at manufacturers end. The company had disputed demand of Rs. 2.47 lakhs before CESTAT against order passed by Commissioner (Appeals). The Stay order has been granted and Rs. 0.50 lakhs paid as ordered by CESTAT.

(i) The Company has received a demand of Rs. 50.68 lakhs from Employee’s Provident Fund office (Previous year Rs. 50.68 lakhs). The company has contested the demand raised, and filed a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advice.

(j) Certain cases filed against the company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts - Amounts unascertained.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable. The Company does not expect the outcome of these proceedings to have materially adverse effect.

9. Balance under the head ‘Trade Receivables’, ‘Trade Payables’, ‘Loan and Advances Receivable and Payable’ are shown as per books of accounts subject to confirmation by concerned parties and adjustment if any, on reconciliation thereof.

10. Inventory of Work in Progress includes Rs. 2585 lakhs of non-moving inventory relating to orders which have been cancelled or kept on hold. The Company contends that this stock will either be liquidated or diverted to other projects without any loss arising there from. Hence no provisions has been made in the books of accounts.

11. Previous year’s figures have been regrouped/ reclassified / rearranged wherever necessary, to conform to current year’s presentation.

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Mar 31, 2017

(b) TERMS AND RIGHTS ATTACHED TO EQUITY SHARES:

The Company has only one class of equity shares having par value of Rs.2 per share. Each shareholder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. Your Directors do not recommend any Dividend for the Financial Year ended March 31, 2017.

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

1 (ii) Corporate Loan of Rs.7500 Lakhs (Rs. 4000 Lakhs from State Bank of India and Rs.3500 Lakhs from Bank of India). Interest rate of State Bank of India Corporate Loan is 15.50% and Bank of India Corporate Loan is 14.25% and is secured by:

a) First pari passu charge on specified demarcated fixed assets of the company''s Heavy Engineering Division.

b) Mortgage of two specified immovable properties at Pune city.

c) 2nd pari passu charge on current assets of the Company.

2 DEFERRED TAX ASSET / (LIABILITY) (NET)

During the year the company has not created further deferred tax asset on loss incurred. Also the deferred tax asset created in the past has also been reversed in terms of accounting standard AS 22.

3 OTHER LONG TERM LIABILITIES

Foot Note - (a) The trade receivables more than 6 months considered good includes Rs.716.32 lakhs (Previous year Rs.847.50 Lakhs) from parties against whom the company has initiated legal / arbitration proceedings. Pending the ultimate outcome of these cases, which is presently unascertained, no provision has been made in respect of these dues.

(b) Non Current Debtors of Rs.1345.68 Lakhs include due from a party amounting to Rs.330.37 Lakhs for which balance confirmation has been obtained. Further subsequent to balance sheet date, the party have paid a sum of Rs.50 Lakhs and confirmed that outstanding payment shall be released by 30^th November 2017. Based on this letter the Company is confident of recovery of the dues and no provision is made.

(c) Non Current Debtors of Rs.1345.68 Lakhs include dues from Govt. parties after completion of projects of Rs.312.56 Lakhs which are considered good for recovery.

4 The Company has sent balance confirmation letters to Sundry Debtors, Creditors and Other Parties and where ever required accounts are under reconciliation. Pending final reconciliation, the balances in respect of these Debtors, Creditors and third parties are as per books of account only. Adjustments having an impact of revenue nature, if any, will be made in the year in which the same are confirmed/reconciled.

5 CURRENT INVESTMENTS

(1) As per the Accounting Policy, company has made a provision for claims related to liquidated damages imposed by the customers up to the period ended as on 31st March 2015. However in the opinion of the Management the delays are not completely attributable to it and has submitted waiver applications and shall continue to pursue the same for waiver.

(2) The Company has made a provision for certain old balances outstanding in respect of sundry Debtors. However Management shall continue to pursue to recover the same.

(3) A provision on account of stock laying with the Sub contractors is made. However Management shall continue to pursue to get back the stock lying with the sub contractors.

6 The Income Tax liability provided during the current year denotes additional actual income tax liability in respect of earlier years as a result of order under section 245 D(4) of the Income Tax Act.

7 As at the end of the year company has reversed the Deferred tax Asset amounting to Rs.1901.01 Lakhs created in the earlier years, as a major of prudence in view of Accounting Standard 22 on Accounting for Taxes.

8 REVALUATION RESERVE AND FIXED ASSETS

The Company has a practice of revaluing its certain assets at certain intervals. On the basis of valuation reports submitted by approved valuers, M/s. D. K. Nagarseth & Associates, certain fixed assets comprising of Land, Building and Plant and Machineries were further revalued at Market Value/ Current Replacement Costs as at September 30, 2013 as follows:

9 EMPLOYEE BENEFITS (REFER NOTE NO. 7)

The Disclosure in terms of Accounting Standard 15 (Revised) - Employee Benefits, notified under the Companies (Accounting Standards) Rules, read with rule 7 to the Companies (Accounts) Rules, 2014 in respect of Section 133 to the Companies Act, 2013, has been given on the basis of Actuarial Valuation Certificate for the period ended March 31, 2017 as below:

10 CONTINGENT LIABILITIES AND COMMITMENTS Rs. in Lakhs

(a) Claims against the company not acknowledged as debt

(a) Demand of Non Agricultural (NA) Tax of Rs.161.37 lakhs is raised by Tahshildar, Indapur (Previous year Rs.161.37 lakhs) out of which Rs.20 lakhs is paid under protest by the company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of Annual Rateable Value of Property at Pune, amounting to Rs.89.32 lakhs (for the period 1.4.2008 to 31.3.2017) was raised by the local authorities (Previous year Rs.325.07 lakhs). No provision has been made in the books of accounts. The Company has not accepted the liability and the same is sub-judice.

(c) The Central Excise Authorities have raised a demand of Rs.266.19 lakhs (Previous Year Rs.266.19 lakhs) (Net of CENVAT Reversal and Payment) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before CESTAT, Mumbai. On the basis of legal opinion, the Company does not accept any liability.

(d) The Central Excise Authorities have raised a demand of Rs.82.73 lakhs (Previous Year Rs.82.73 lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers'' end. The Company has disputed the demand and has preferred an appeal which is pending before the Supreme court. Company has discharged a liability of Rs.29.45 lakhs by reversal of CENVAT availed and paid Rs.10 lakhs under protest (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(e) The sales Tax Authority, Maharashtra has raised demand of Rs.159.83 lakhs (Previous Year Rs.159.83 lakhs) as per section 6(2) of the Central Sales Tax Act,1956. The Company has paid Rs.30.00 lakhs under protests (included under the head loans and advances). The appeal has been dismissed by the Sales Tax Appellate Commissioner, and the company has preferred to appeal to the Tribunal. On the basis of legal opinion the Company does not expect any liability.

(f) Service Tax demand of Rs.362.65 lakhs(Previous Year Rs.362.65 lakhs) on sale of bought out items has been raised by the concerned authorities. The company has discharged liability of Rs.28.76 lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(g) Company has received a demand of Rs.50.68 lakhs from Employee''s Provident Fund office (previous year Rs.50.68 lakhs). The company has contested the demand raised, and filled a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advise.

(h) Certain cases filled against the company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts - Amounts unascertained.

(i) The Central Excise Authorities have raised demand of Rs.2.47 lakhs (Previous Year Rs.2.47 lakhs) on bought out items supplier for centrifugals, which has already suffered duty at manufacturers end. The company had disputed demand of Rs.2.47 lakhs before CESTAT against order passed by Commissioner (Appeals). The Stay order has been granted and Rs.0.50 lakhs paid as ordered by CESTAT.

(j) Certain customers of the Company have deducted Liquidated Damages amounting to Rs.664.09 Lakhs (previous year Rs.620.09 lakhs) during the current period due to delays in supplies / services. The Company contends that the delays are not attributable to it and has submitted the waiver applications to these parties. Based on past experience, the Company is confident of getting these Liquidated Damages waived.

(k) Company has received a demand from a MSME creditor for interest amounting to Rs.45.74 lakhs (Net), which has not being accepted as a liability as the same is contested.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable. The Company does not expect the outcome of these proceedings to have materially adverse effect.

11 After the Companies Act 2013 coming in to force, the company has changed the accounting year ending from September to March. As a result the previous accounting year comprises of a period of eighteen months ending 31^st March, 2016, therefore the figures for the current accounting year are not comparable with the previous accounting year which is comprising of 18 months.

12 Disclosure on Specified Bank Notes (SBN''s) - During the year, the company had specified Bank notes or other denomination notes as defined in the MCA notification GSR 308 (E) dated 31^st March, 2017 on the details of specified bank notes (SBN''s) held and transacted during the period from 8^th November, 2016 to 30^th December, 2016, the denomination wise SBN''s and other notes as per the notification is given below.

13 The Company has already given the instructions to the Bank to transfer the amount of Unclaimed Preference Shares Redemption Account of Rs.1.44 lacs to Investor Education and Protection Fund. However, since the Bank Account is very old, KYC has to be updated due to change in Signatories of the company and after KYC updation, the amount will be transferred to Investor Education and Protection Fund.

14 Previous year''s figures have been regrouped / reclassified / rearranged wherever necessary, to conform to current year''s presentation.

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Mar 31, 2016

(b) TERMS AND RIGHTS ATTACHED TO EQUITY SHARES:

The Company has only one class of equity shares having par value of Rs. 2 per share. Each shareholder of equity share is entitled to one vote per share. The company declares and pays dividends in Indian Rupees.

Your directors do not recommend any Dividend for Financial Year / period ended March 31, 2016.

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

1 (ii) Corporate Loan of Rs. 7500 Lakhs (Rs. 4000 Lakhs from State Bank of India and Rs. 3500 Lakhs from Bank of India) at an interest rate of 12.50 % is secured by:

(a) First pari passu charge on specified demarcated fixed assets of the company''s Heavy Engineering Division.

(b) Mortgage of two specified immovable properties at Pune city.

(c) 2^nd pari passu charge on current assets of the Company.

2 (iii) Corporate Loan of Rs. 3482 Lakhs (from IFCI Ltd.) at an interest rate of 13.85 % is secured by:

(a) Exclusive charge on Flat No. 3 and 40 of Walchand Terraces, Tardeo Road, Mumbai and Unit 2B of Industry Manor, Prabhadevi Mumbai.

(b) Exclusive pledge of 40 lakhs equity shares of Walchandnagar Industries Ltd.

The said loan is repayable in 12 equal quarterly instalments starting from December 2017 onwards.

(1) The Company has made a provision for claims related to liquidated damages imposed by the customers upto the financial year ended 31^st March, 2014 as per the policy adopted by the Company on liquidated damages. However in the opinion of the Management the delay are not completely attributable to it and has submitted waiver applications and shall continue to pursue the same for waiver.

(2) The Company has made a provision for certain old balances outstanding in respect of sundry Debtors. However Management shall continue to pursue to recover the same.

(3) The Company has made a provision for certain old balances outstanding in respect of advances to suppliers. However Management shall continue to pursue to recover the same.

(4) The Company has made a provision on account of stock lying with the Sub contractors. However Management shall continue to pursue to get back the stock lying with the sub contractors.

3. The Income Tax liability provided during the current period denotes additional estimated income tax liability in respect of earlier years as a result of order under section 245 D(4) of the Income Tax Act.

4. RELATED PARTY DISCLOSURES

Related party disclosures as required under Accounting Standard 18 (Related Party Disclosures), specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 are given below:

(i) Individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise and relatives of any such individual:

Name of the individual : Designation / Relation

Mr. Chakor L. Doshi : Chairman

Mrs. Champa C. Doshi : Wife

Mr. Chirag C. Doshi : Son

Mrs. Kanika G. Sanger : Daughter

Mrs. Tanaz Chirag Doshi : Daughter-in-law

(ii) Key Management personnel and relatives:

Name of the individual : Designation / Relation

Mr. G. K. Pillai : Managing Director & CEO

Mr. Chirag C. Doshi : Managing Director

Mr. G. S. Agrawal : Vice President (Legal & Taxation) & Company Secretary

Mr. Hiren Buch : Chief Financial Officer (upto 5^th March, 2016)

(iii) Enterprises over which any person described in (i) or (ii) above are able to exercise significant influence:

Bombay Cycle & Motor Agency Ltd. (BCMA) Olsson Holdings Inc.

Walchand Great Achievers Pvt. Ltd. Vinod Shashank Chakor Pvt. Ltd.

Walchand Kamdhenu Commercials Pvt. Ltd. Chirag Enterprises

Walchand Chiranika Trading Pvt. Ltd. Walchand Engineers Pvt. Ltd.

Chakor Doshi HUF Walchand Projects Pvt. Ltd.

Chirag Doshi HUF Walchand Power Systems Pvt. Ltd.

Chiranika Enterprises Walchand Oil & Gas Pvt. Ltd.

Chiranika Corporation Walchand Leisure Realty Pvt. Ltd.

Chiranika Properties Walchand BMH Pvt. Ltd.

Walchand Botanicals Pvt. Ltd. Walchand Solar Pvt. Ltd.

Rodin Holdings Inc. Trust Finlease Pvt. Ltd.

Walchand Ventures LLP

5. REVALUATION RESERVE AND FIXED ASSETS

The Company has a practice of revaluing its certain assets at certain intervals. On the basis of valuation reports submitted by approved valuers, M/s. D. K. Nagarseth & Associates, certain fixed assets comprising of Land, Building and Plant and Machineries were further revalued at Market Value/ Current Replacement Costs as at September 30, 2013 as follows:

6. EMPLOYEE BENEFITS (REFER NOTE NO. 7)

The Disclosure in terms of Accounting Standard 15 (Revised) - Employee Benefits, notified under the Companies (Accounting Standards) Rules, read with rule 7 to the Companies (Accounts) Rules, 2014 in respect of Section 133 to the Companies Act, 2013, has been given on the basis of Actuarial Valuation Certificate for the period ended March 31, 2016 as below:

7. CONTINGENT LIABILITIES AND COMMITMENTS Rs. in Lakhs

(a) Claims against the company not acknowledged as debt

(a) Demand of Non Agricultural (NA) Tax of Rs. 161.37 lakhs is raised by Tahshildar, Indapur (Previous year Rs. 161.37 lakhs) out of which Rs. 20 lakhs is paid under protest by the company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of Annual Rateable Value of Property at Pune, amounting to Rs. 325.07 lakhs (for the period 1.4.2008 to 31.3.2012) was raised by the local authorities (Previous year Rs. 325.07 lakhs). No provision has been made in the books of accounts. The Company has not accepted the liability and the same is sub-judice.

(c) The Central Excise Authorities have raised a demand of Rs. 266.19 lakhs (Previous Year Rs. 266.19 lakhs) (Net of CENVAT Reversal and Payment) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before CESTAT, Mumbai. On the basis of legal opinion, the Company does not accept any liability.

(d) The Central Excise Authorities have raised a demand of Rs. 82.73 lakhs (Previous Year Rs. 82.73 lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers'' end. The Company has disputed the demand and has preferred an appeal which is pending before the Supreme court. Company has discharged a liability of Rs. 29.45 lakhs by reversal of CENVAT availed and paid Rs. 10 lakhs under protest (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(e) The sales Tax Authority, Maharashtra has raised demand of Rs. 159.83 lakhs (Previous Year Rs. 159.83 lakhs) as per section 6(2) of the Central Sales Tax Act,1956. The Company has disputed the demand and has preferred an appeal before The Sales Tax Appellate Commissioner. Company has paid Rs. 30.00 lakhs under protests (included under the head loans and advances). On the basis of legal opinion the Company does not expect any liability.

(f) Service Tax demand of Rs. 362.65 lakhs on sale of bought out items has been raised by the concerned authorities. The company has discharged liability of Rs. 28.76 lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(g) Company has received a demand of Rs. 50.68 lakhs from Employee''s Provident Fund office (previous year Rs. 50.68 lakhs). The company has contested the demand raised, and filled a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advice.

(h) Certain cases filed against the company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts - Amounts unascertained.

(i) The Central Excise Authorities have raised demand of Rs. 2.47 lakhs (Previous Year Rs. 2.47 Lakhs) on bought out items supplier for centrifugals, which has already suffered duty at manufacturers end. The company had disputed demand of Rs. 2.47 lakhs before CESTAT against order passed by Commissioner (Appeals). The Stay order has been granted and Rs. 0.50 lakhs paid as ordered by CESTAT.

(j) Certain customers of the Company have deducted Liquidated Damages amounting to Rs. 620.09 lakhs during the current period from 1/4/2014 to 31/3/2016 due to delays in supplies/ services. The Company contends that the delays are not attributable to it and has submitted the waiver applications to these parties. Based on past experience, the Company is confident of getting these Liquidated Damages waived. (Refer note 14.1).

8. After the Companies Act 2013 coming in to force, the company has changed the accounting year ending from September to March. As a result the current accounting year comprises of a period of eighteen months ending 31st March, 2016, therefore the figures for the current accounting period are not comparable with the previous accounting year which is comprising of 12 months.

9. Previous year''s figures have been regrouped/ reclassified / rearranged wherever necessary, to conform to current year''s presentation.

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Sep 30, 2014

1 REVENUE FROM OPERATIONS

Change in Accounting Policy: With effect from October 01, 2013, in case of certain long term contracts involving design, supply, erection and commissioning of complex machinery, the company has changed to Accounting Standard 7 (Construction Contracts) from Accounting Standard 9 (Revenue Recognition) notified under the Companies (Accounting Standards) Rules, 2006 (as amended), for recognizing revenue, being a more appropriate method of accounting, considering the nature of the activity. As a result of this change, revenue from operations for the year is higher by Rs. 1,770.38 Lakhs and loss for the year is lower by an equivalent amount.

2 Consequent to the proceedings under section 132 of the Income Tax Act, 1961 initiated by the Department in the month of December, 2012, the Company has filed an application before the settlement commission, which has been admitted for further hearings and the proceedings are in progress. The income tax liability arising thereof, relating to the earlier years, has been provided for in the books of accounts and included under tax for earlier years in the previous year.

3 RELATED PARTY DISCLOSURES

Related party disclosures as required under Accounting Standard 18 (Related Party Disclosures), notified under the Companies (Accounting Standards) Rules, 2006 (as amended) are given below:

(i) Individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise and relatives of any such individual:

Name of the individual : Designation / Relation

Mr. Chakor L. Doshi : Chairman

Mrs. Champa C. Doshi : Wife

Mr. Chirag C. Doshi : Son

Mrs. Kanika G. Sanger : Daughter

Mrs. Tanaz Chirag Doshi : Daughter-in-law

(ii) Key Management personnel and relatives:

Name of the individual : Designation / Relation

Mr. G. K. Pillai : Managing Director & CEO

Mr. Chirag C. Doshi : Managing Director

Mr. Hiren Buch : Chief Financial Officer

Mr. G. S. Agrawal : Vice President (Legal & Taxation) & Company Secretary

(iii) Enterprises over which any person described in (i) or (ii) above are able to exercise significant influence:

Bombay Cycle & Motor Agency Ltd. (BCMA) Olsson Holdings Inc.

Walchand Great Achievers Pvt. Ltd. Vinod Shashank Chakor Pvt. Ltd.

Walchand Kamdhenu Commercials Pvt. Ltd. Chirag Enterprises

Walchand Chiranika Trading Pvt. Ltd. Walchand Engineers Pvt. Ltd.

Chakor Doshi HUF Walchand Projects Pvt. Ltd.

Chirag Doshi HUF Walchand Power Systems Pvt.Ltd.

Chiranika Enterprises Walchand Oil & Gas Pvt.ltd.

Chiranika Corporation Walchand Leisure Realty Pvt. Ltd.

Chiranika Properties Walchand BMH Pvt. Ltd.

Walchand Botanicals Pvt. Ltd. Walchand Solar Pvt. Ltd.

Rodin Holdings Inc. Trust Finlease Pvt. Ltd.

Details of transactions relating to the individuals / enterprises referred to in item (i), (ii) and (iii) above are as follows. The same are in the ordinary course of business.

The Company has a practice of revaluing its certain assets at certain intervals. On the basis of valuation reports submitted by approved valuers, M/s. D. K. Nagarseth & Associates, certain fixed assets comprising of Land, Building and Plant and Machineries were further revalued at Market Value/ Current Replacement Costs as at September 30, 2013 as follows:

4 EMPLOYEE BENEFITS (REFER NOTE NO. 7)

The Disclosure in terms of Accounting Standard 15 (Revised) - Employee Benefits, notified under the Companies (Accounting Standards) Rules, 2006 (as amended), has been given on the basis of Actuarial Valuation Certificate for the year ended September 30, 2014 as below:

(a) Claims against the company not acknowledged as debt

(a) Demand of Non Agricultural (NA) Tax of Rs. 161.37 Lakhs is raised by Tahshildar, Indapur (Previous year Rs. 161.37 Lakhs) out of which Rs. 20 Lakhs is paid under protest by the Company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of Annual Rateable Value of Property at Pune, amounting to Rs. 325.07 Lakhs (for the period 1.4.2008 to 31.3.2012) was raised by the local authorities (Previous Year Rs. 325.07 Lakhs). No provision has been made in the books of accounts. The Company has not accepted the liability and the same is sub-judice.

(c) The Central Excise Authorities have raised a demand of Rs. 266.19 Lakhs (Previous Year Rs. 266.19 Lakhs) (Net of Cenvat Reversal and Payment) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before CESTAT, Mumbai. On the basis of legal opinion, the Company does not accept any liability.

(d) The Central Excise Authorities have raised a demand of Rs. 82.73 Lakhs (Previous Year Rs. 82.73 Lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers'' end. The Company has disputed the demand and has preferred an appeal which is pending before the Supreme court. Company has dicharged a liability of Rs. 29.45 Lakhs by reversal of CENVAT availed and paid Rs. 10 Lakhs under protest (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(e) The sales Tax Authority, Maharashtra has raised demand of Rs. 159.83 Lakhs (Previous Year Rs. 159.83 Lakhs) as per section 6(2) of the Central Sales Tax Act,1956. The Company has disputed the demand and has preferred an appeal before The Sales Tax Appellate Commissioner. Company has paid Rs. 30.00 Lakhs under protest (included under the head loans and advances). On the basis of legal opinion the Company does not expect any liability.

(f) Service Tax demand of Rs. 362.65 Lakhs on sale of bought out items has been raised by the concerned authorities. The company has discharged liability of Rs. 28.76 Lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(g) Company has received a demand of Rs. 50.68 Lakhs from Employee''s Provident Fund office. The company has contested the demand raised, and filled a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advise.

(h) Certain cases filed against the company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts - Amounts unascertained.

(i) The Central Excise Authorities have raised demand of Rs. 2.47 Lakhs (Previous Year Nil) on bought out items supplier for centrifugals, which has already suffered duty at manufacturers end. The company had disputed demand of Rs. 2.47 Lakhs before CESTAT against order passed by Commissioner (Appeals). The Stay order has been granted and Rs. 0.50 Lakhs paid as ordered by CESTAT.

(j) Certain customers of the Company have deducted Liquidated Damages amounting to Rs. 1,311.29 Lakhs due to delays in supplies/ services. The Company contends that the delays are not attributable to it and has submitted the waiver applications to these parties. Based on past experience, the Company is confident of getting these Liquidated Damages waived.

5 Previous year''s figures have been regrouped/ reclassified / rearranged wherever necessary, to conform to current year''s presentation. As per our report attached

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Sep 30, 2013

1. CONTINGENT Liabilities AND Commitments

Rs. in Lakhs

As at As at September 30, September 30, 2013 2012

(i) Counter Guarantees by the Company in respect of guarantees given by banks (including guarantee on account of erstwhile Machine Tool Division of Rs. 3.55 Lakhs) 31,004.83 27,092.62

(ii) Estimated amount of Contracts remaining to be executed on Capital accounts not provided for (Net of advance) 75.36 429.27

(iii) (a) Demand of Non agricultural (NA) Tax of Rs. 161.37 Lakhs is raised by Tahshildar, Indapur (Previous year Rs. 161.37 Lakhs) out of which Rs. 20 Lakhs is paid under protest by the company. No provision has been made in the accounts as the company has not accepted the liability and the matter is sub-judice.

(b) Demand on account of fixation of annual Rateable Value of property at Pune amounting to Rs. 325.07 Lakhs (for the period from 1-4-2008 to 31-3-2012) raised by the local authorities (Previous Year Rs. 325.07 Lakhs). No provision has been made in the account as the company has not accepted the liability and the same is sub-judice.

(c) The Central Excise authorities have raised a demand of Rs. 266.19 Lakhs (Net) (Previous year Rs. 266.19 Lakhs) (Net) denying the exemption from the excise duty on non-conventional energy devices/systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before ''CESTAT, Mumbai'' on the basis of a legal opinion, the Company does not expect any liability.

(d) The Central Excise authorities have raised a demand of Rs. 82.73 Lakhs (Previous Year Rs. 82.73 Lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufactures end. The Company has disputed the demand and has preferred an appeal which is pending before Supreme court. Company has discharged Liability of Rs. 29.45 Lakhs by reversal of CENVAT availed and paid Rs.10.00 Lakhs under protests (included under the head loans and advances). On the basis of legal opinion, the Company does not expect any liability.

(e) The Sales Tax authority, Maharashtra has raised demand of Rs.159.83 Lacs (Previous Year Rs. 159.83 Lakhs) as per Section 6(2) of the Central Sales Tax Act,1956. The Company has disputed the demand and has preferred an appeal before The Sales Tax appellate Commissioner. Company paid Rs. 30.00 Lakhs under protests (included under the head loans and advances). On the basis of legal opinion the Company does not expect any liability.

(f) The Sales Tax authority, Andhra Pradesh, has raised a demand of Rs. 475.53 Lakhs (Previous Year NIL) under Rule 60 of the Andhra Pradesh Value added Tax act. The Company has disputed the demand and has preferred an appeal before appellate Deputy Commissioner (C.T.), Secunderabad, Hyderabad. Based on the legal opinion, the company does not accept any liability. However, company has paid Rs. 60.28 Lakhs "Under Protest".

(g) Service Tax demand of Rs. 362.65 Lakhs on sale of bought out items has been raised by the concerned authorities. The company has discharged liability of Rs. 28.76 Lakhs by way of CENVAT reversal under protest and has preferred an appeal which is pending before the CESTAT.

(h) Bond issued to customs department for export obligations amounting to Rs. 1,363.45 Lakhs (previous year Rs. 1,363.45 Lakhs).

(i) Company has received a demand of Rs. 50.68 Lakhs from Employee''s Provident Fund office. The company has contested the demand raised, and filed a writ petition with Mumbai High Court. No provision is being made against the same based on the legal advice.

(j) Certain cases filed against the Company by the Ex-employees of Heavy Engineering Division and Foundry Division for compensation are pending before the labour courts — Amounts unascertained.

2. Consequent to the proceedings u/s 132 of the Income Tax Act initiated by the Department in the month of December, 2012, the Company has filed an application before the settlement commission which has been admitted for further hearings. The Income Tax Liability arising thereof relating to the previous years has been provided for in the accounts and included under tax expense for earlier years.

3. Following adjustments have been made arising out of proceedings u/s 132 of Income Tax Act, 1961:

(a) Scrap Sale of Rs. 51.95 Lakhs is included in Note No. 20: Other income at Sr. No. (k) Prior period income.

(b) Excise Duty of Rs. 41.66 Lakhs is included in Note No. 27: Other Expenses at Sr. No. (v) Prior period expenses.

4. The Previous Year''s figures have been regrouped/reclassified to conform to Current Year''s presentation.

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Sep 30, 2010

1. State Government has acquired some of the lands at Walchandnagar. The District Court has given an award of Rs. 285 Lakhs including interest in favour of the Company and has allowed the Company to withdraw the amount on furnishing of Bank Guarantee and Security Bond. However, as the matter is in appeal, the award is not accounted for as sale.

2. CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF:

As at 30.09.2010 As at 30.09.2009 Rs. in Lakhs Rs. in Lakhs

(i) Counter Guarantees by the Company in respect of guarantees given by the banks (including guarantee on account of erstwhile Machine Tool Division of Rs. 3.55 Lakhs). 29,644.15 24,617.75

(ii) Estimated amount of Contracts remaining to be executed on Capital Accounts & not provided for (Net of Advance). 95.20 1,020.20

(iii) During the year, a customer has invoked Bank Guarantee of Rs. 700 Lakhs (shown under Loans & Advances) on the grounds of alleged non performance of the Contract. The Company has disputed this claim since the subject Bank Guarantee was conditional and in the opinion of the Company, the condition precedent for it to become operative was not fulfilled. The Company has invoked Arbitration Proceedings as per the provision of the Contract, which has already commenced, for recovery of this amount together with the contractual dues of Rs. 744 lakhs owed by the customer, shown under the head Sundry Debtors in the Financial Statements. Based on the facts of the case the Company is of the opinion that it has a good case on merits.

The matter is sub-judice and the Company has been legally advised that it has a case worth pursuing. In view of the forgoing, no provision is considered necessary at this stage.

(iv) (a) Demand of NA Tax of Rs. 86.61 lakhs is raised by Tahshildar, Indapur (Previous year Rs. 86.61 Lakhs) out of which Rs. 20 lakhs is paid under protest by the Company. No provision has been made in the accounts as the Company has not accepted the liability and the matter is sub-judice.

(b) The Central Excise Authorities have raised a demand of Rs. 266.19 Lakhs (Net of CENVAT reversal and payment) denying the exemption from the excise duty on non-conventional energy devices/ systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before ‘CESTAT, Mumbai. On the basis of legal opinion, the Company does not expect any liability.

(c) The Central Excise Authorities have raised a demand of Rs. 79.98 Lakhs (Previous year Rs. 61.36 Lakhs) on bought out items supplied for Centrifugals, which has already suffered duty at manufacturers end. The Company has disputed the demand and has preferred an appeal which is pending before ‘CESTAT, Mumbai. On the basis of legal opinion, the Company does not expect any liability.

3. During the year, the Company reached an out of Court Settlement with Projects & Equipment Corporation of India Ltd. (PEC) on all their disputes pertaining to the Cement Project at Padang Indonesia, which were long pending before the Honble High Courts of Bombay (Suit filed by Company) and Delhi (Suit filed by PEC). Consequent to the said settlement, both the suits stand withdrawn. Accordingly, the Company has after adjusting the contingency reserve created specifically against the same charged off the net amount of settlement to the Profit & Loss Account. Consequently, the deferred tax liability of Rs. 545 Lakhs, provided earlier has been reversed.

4. Pursuant to the approval of the shareholders at the Extra Ordinary General Meeting held on 23.11.2006 and in accordance with SEBI (DIP) Guidelines, the Company had issued 80,00,000 fully paid up Equity shares to the promoters on preferential Basis, post conversion of 8,00,000 convertible warrants and received the total amount of Rs. 5,072 lakhs. Out of these Rs. 1,272 lakhs (Previous year Rs. 1,184 lakhs) has been utilized for capital expenditure, Rs. 2,780 lakhs (Previous Year Rs. 2,780 lakhs) for working capital and the balance amount of Rs. 1,020 lakhs (Previous year Rs. 1,108 lakhs) is invested in Mutual Funds.

5. The figures for the Previous year are regrouped wherever necessary.

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Sep 30, 2009

1. The Company has a practice of revaluing its certain assets at certain intervals. On the basis of valuation reports submitted by the approved valuers, certain fixed assets comprising Land, Building, Plant & Machinery, Roads, Water Works, etc., were revalued at Market Value/Current Replacement cost as at 01 -10-2007 as follows:

The depreciation for the year ended 30-09-2009 on Revalued Assets has been calculated on Straight Line Method on their residual technical life assessed by the Valuers. However, the amount of Depreciation charged to Profit & Loss Account is as per Schedule XIV to the Companies Act, 1956, on the cost of the assets.

2. State Government has acquired some of the lands at Walchandnagar. The District Court has given an award of Rs. 285 Lakhs including interest in favour of the Company and has allowed the Company to withdraw the amount on furnishing of Bank Guarantee and Security Bond. However, as the matter is in appeal, the award is not accounted for as sale.

3. CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF:

As at 30.09.2009 As at 30.09.2008 Rupees Rupees in Lakhs in Lakhs

(i) Counter Guarantees by the Company in respect of guarantees given by the banks (including guarantee on account of erstwhile Machine Tool Division of Rs. 3.55 Lakhs). 24,617.75 16,961.98

(ii) Estimated amount of Contracts remaining to be executed on Capital Accounts & not provided for. 1,020.20 507.60

(iii) (a) Bank Guarantees amounting to Rs. 12.50 Lakhs (Previous year Rs. 12.50 Lakhs) were invoked in 1998, for which no provision has been made in the accounts as the Company has not accepted the liability and the matter is sub-judice.

(b) The Performance and Retention Bank Guarantees (BG) of Rs. 588.64 Lakhs relating to Padang (Indonesia) Project, were invoked during the year 1986 by Project and Equipment Corporation of India Ltd. (PEC). As per the Supreme Court order and Undertaking given by PEC, the Consortium Banks have paid Rs. 400 Lakhs against the invoked BG. The principal amount and interest aggregating to Rs. 2,002.21 Lakhs is already paid to Banks and the same is shown as receivable from PEC under the head Loans and Advances. The matter is sub judice and liability is denied by Company based on legal opinion.

(c) Even though Company has not accepted the liability as stated above, as a measure of abundant prudence, Contingency Reserve of Rs. 2,085.48 Lakhs is created to take care of the contingent liability.

(d) Demand of NA Tax of Rs. 86.61 Lakhs is raised by Tahshildar, Indapur (Previous year Rs. 86.61 Lakhs) out of which Rs. 20 Lakhs is paid under protest by the Company. No provision has been made in the accounts as the Company has not accepted the liability and the matter is sub-judice.

(iv) (a) The Central Excise Authorities have raised a demand of Rs. 266.19 Lakhs (Net of CENVAT reversal and payment) denying the exemption from the excise duty on non-conventional energy devices/systems supplied by the Company. The Company has disputed the demand and has preferred an appeal which is pending before CESTAT, Mumbai. On the basis of legal opinion, the Company does not expect any liability.

(b) The Central Excise Authorities have raised a demand of Rs. 61.36 Lakhs (Previous year Rs. 49.38 Lakhs) on bought out items supplied for centrifugals, which has already suffered duty at manufacturers end. The Company has disputed the demand and has preferred an appeal which is pending before CESTAT, Mumbai. On the basis of legal opinion the Company does not expect any liability.

4. Pursuant to the approval of the shareholders at the Extra Ordinary General Meeting held on 23.11.2006 and in accordance with SEBI (DIP) Guidelines, the Company had issued 80,00,000 fully paid up Equity shares to the promoters on preferential Basis, post conversion of 8,00,000 convertible warrants and received the total amount of Rs. 5,072 Lakhs. Out of these Rs. 1,184 Lakhs (Previous year Rs. 77 Lakhs) has been utilized for capital expenditure, Rs. 2,780 Lakhs (Previous year Rs. 1,004 Lakhs) for working capital and the balance amount of Rs. 1,108 Lakhs (Previous year Rs. 3,991 Lakhs) is invested in Mutual Funds.

5. Pursuant to the Resolution passed at the Annual General Meeting held on 29-01-2009 Company has allotted 25145 equity shares at Rs. 2 per share to the permanent employees under Employees Stock Purchase Scheme, 2008 as per SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines 1999.

(ii) the lease agreements provide for an option to the Company to renew the lease period on mutually agreeable terms. There are no exceptional/restrictive covenants in the lease agreements.

(iii) The nature of products under Heavy Engineering Division is such that it is not possible to evaluate the quantitative data in exact terms.

6. The figures for the Previous year are regrouped wherever necessary.

Additional information pursuant to provision of paragraph 3,4C and 4D of part II of Schedule VI to the Companies Act 1956 as certified by the Management.