Notes to Accounts of Zen Technologies Ltd.

Mar 31, 2023

(iii) Terms/rights attached to equity shares

The Company has only one class of equity shares having par value of ? 1/- each. Each equity shareholder is entitled to one vote per equity share held. 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 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.

Details of borrowings:

(i) Cash Credit (CC) mentioned in (a) amounting to ? Nil (31 March 2022: ? Nil) and Over draft (OD) mentioned in (b) amounting to ? 157.08 lakhs (31 March 2022: ? Nil) obtained from Indian Bank (? 26.24 lakhs) and from HDFC Bank (? 130.84 lakhs) are secured by way of:

Primary Security: Inventories, Other Current Assets and Trade Receivables Collateral Security:

- HDFC Bank

- Signature Tower Building, 11 Kothaguda Village and 12 floor of Signature building of 25000 Sq Ft, SY No:6 Kondapur, Kothaguda - 500084.

- Delhi 1, Apartment NH 24 adjacent to Akshardham No. T-27-06-04, Fifth floor of 1969 Sq Ft, Common Wealth Games Village - 110092.

- Delhi 2, Apartment NH 24 adjacent to Akshardham No. T-27-01-03, Ground floor of 2654.3 Sq Ft, Common Wealth Games Village - 110092.

- Delhi 3, Apartment NH 24 adjacent to Akshardham No. T-20-07-04, Sixth floor of 1969.52 Sq ft, Common Wealth Games Village - 110092.

- Delhi 4, Apartment NH 24 adjacent to Akshardham No. T-20-01-02, Ground floor of2654.32 Sq Ft, Common Wealth Games Village - 110092.

- Indian Bank

- Corporate Office/Building Admeasuring 2540 Sq yards Located at B-42, Industrial Estate, Sanath nagar, Hyderabad-500018.

- EXIM Bank

- Industrial Plot of Land Admeasuring 2034.10 Sq Meters located at Plot No 99/2, IDA Cherlapally, Cherlapally village, Kapra Mandal, Medchal, Telangana.

- ICICI Bank

- Plot No: 35,36,37 Hardware Park, Maheshwaram Mandal, Ravirala Village, Hyderabad - 501510.

- AXIS Bank

- First Pari Passu charge on entire Current Assets of the Company both Present and Future and the First Pari Passu charge on Collateral Property shared along with ICICI.

Other Details:

The Avg.Rate of Interest of CC is 9.67% p.a of and Cash credit is the sub-limit of ? 3,000 lakhs of total limits of ? 21,100 lakhs which consists of Bank Guarantee, Letter of Credit, Pre and Post Shipment Credit, PSR and Corporate Card Limits.

(ii) Borrowings mentioned in (c) are secured by the hypothecation of respective vehicles for which loans are availed.

(iii) Borrowings mentioned in (d) is the financial liability component of CCDs issued during the previous year which is carried at interest rate of 8.50% p.a. For further Details refer Note 48.

35. EARNINGS PER SHARE

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the holding Company by the weighted average number of Equity shares outstanding during the year excluding the treasury shares as per Ind AS 33 Earnings per share.

Diluted earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the holding Company (after adjusting for interest on the Compulsory convertible debentures) by the weighted average number of equity shares outstanding during the period/ year used for computing Basic EPS plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.

(b) Defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of continuous service gets a gratuity on retirement at 15 days last drawn basic salary for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy.

37. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Contingent liabilities

I) Claims against the Company not acknowledged as debts:

i) On account of Direct Tax matters - ? 441.48 lakhs (31 March 2022: ? 54.04 lakhs)

ii) On account of Indirect Tax matters (Central Excise Duty) - ? 823.40 lakhs (31 March 2022: ? 823.40 lakhs)

The Company is contesting the demands and the management, including its tax advisors, believe that its position will likely be upheld in the appellate process with respect to Direct Tax and Indirect tax matters. No tax expense has been accrued in the financial statements for the

tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company''s financial position and results of operations.

Note:

Income tax demands mainly include the appeals filed by the Company before various appellate authorities against the disallowance by income tax authorities of certain expenses being claimed and and the computation of, or eligibility of the Company''s use of certain tax incentives or allowances. During the year, the Company has reassessed the existing possible obligations, accordingly considered under contingent liability.

Key managerial personnel of the Company is covered by the Company''s gratuity policy and is eligible for compensated absences along with other employees of the Company. The proportionate amount of gratuity and compensated absences cost pertaining to them have not been included in the aforementioned disclosure as these cannot be determined on an individual basis.

The transactions with related parties are made on terms equivalent to those that prevail in arm''s length transactions. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year-end are unsecured.

B. Measurement of fair values i. Transfer between Level 1 and 2

There have been no transfers from Level 2 to Level 1 or vice-versa in the current year and no transfers in either direction in previous year

42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company''s financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company''s financial assets comprise mainly of investments, cash and cash equivalents, other balances with banks, loans, trade receivables and other receivables.

The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities.

The Board ofDirectors has overall responsibility for the establishment and oversight of the Company''s risk management framework. In performing its operating, investing and financing activities, the Company is exposed to the Credit risk and Liquidity risk.

i) 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 interest rate risk. Financial instruments affected by market risk include loans, borrowings and deposits.

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.

The Company is having current borrowings in the form of working capital, Compulsory Convertible Debentures (CCDs) and current maturities of vehicle loan. There is a fixed rate of interest in case of vehicle loan, Compulsory Convertible Debentures (CCDs) hence, there is no interest rate risk associated with these borrowings. The Company is exposed to interest rate risk associated with working capital facility due to floating rate of interest.

The following analysis is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax. The correlation of variables will have significant effect in determining the ultimate impact of interest rate risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should be noted that movements in these variables are non-linear The method used for deriving sensitivity information and significant variables have not been changed from the previous period.

As at 31 March 2023 and 31 March 2022, Current borrowings (Working capital facility) of ? 157.08 lakhs and ? Nil, respectively, were subject to variable interest rates.

b. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in a foreign currency). 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.

ii) Credit Risk

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from credit exposures from trade receivables, advances given to suppliers (for procurement of goods, services and capital goods), cash and cash equivalent with banks, security deposits and loans.

Trade Receivables and Other Receivables

The credit risk of the Company is managed at a corporate level by the risk management committee which has established the credit policy norms for its customers. The Company expects to continue to derive most of its revenue from the Indian Defence Services under the contracts of the Ministry of Defence (MoD),consequent to which the Company has a negligible credit risk associated with such receivables.

Provision for expected credit losses

As the debtors are predominantly the Government of India (Indian Defence Services, Ministry of Home Affairs), Public Sector Undertakings where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is negligible. Accordingly, impairment on account of expected credit losses is being assessed on a case to case basis in respect of dues outstanding for significant period of time as per the accounting policy. Further, management believes that the unimpaired amounts that are due is collectable in full, based on historical payment behaviour and extensive analysis of customer credit risk.

In a few cases credit is extended to customers based on market conditions after assessing the solvency of the customer and the necessary due diligence to determine credit worthiness. Advance payments are made against bank guarantee which safeguards the credit risk associated with such payments. Impairment losses on financial assets have been made after factoring contractual terms and other indicators.

Financial instruments and cash deposits

The cash and cash equivalent with banks are in the form of short term deposits with maturity period of up to 1 year The Company has a well structured Risk Mitigation Policy whereby there are present limits for each bank based on its net worth and earning capacity which is reviewed on a periodic basis. The Company has not incurred any losses on account of default from banks on deposits.

The credit risk in respect of other financial assets is negligible as they are mostly due from government department/other parties.

Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the top management on an annual basis, and may be updated throughout the year subject to approval of the Company board of directors.

The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

iii) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments that are settled by delivering cash or another financial asset. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

The Company has an established liquidity risk management framework for managing its short term, medium term and long term funding and liquidity management requirements. The Company''s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Company manages the liquidity risk by maintaining adequate funds in cash and cash equivalents. The Company also has adequate credit facilities agreed with banks to ensure that there is sufficient cash to meet all its normal operating commitments in a timely and cost-effective manner

Gearing ratio:

The Company monitors capital using gearing ratio, which is net debt divided by total capital plus net debt. The Company''s policy is to keep the gearing ratio within 50%. In order to achieve this overall objective, the Company makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company aims to ensure that it meets the financial covenants attached to the interest bearing loans and borrowings that define the capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interestbearing loans and borrowings in the current year

*As at 31 March 2023 and 31 March 2022, Gearing Ratio is negative on hence represented as Nil.

44. EMPLOYEE STOCK OPTION SCHEME

a) The objective of the Employee Stock Option Scheme is to attract and retain talent and align the interest of employees with the Zen Technologies Limited (ZTL) as well as to motivate them to contribute to its growth and profitability. The Company adopts Senior Executive Plan in granting Stock options to its Senior Employees. (Employee Stock Option Plan-2021).

During the Annual General Meeting held on 28 August 2021, Zen Technologies Limited introduced the Employee Stock Option Plan-2021, which was subsequently ratified by the shareholders on 29 September 2022, in accordance with SEBI Regulations. The plan received in-principle approval from the National Stock Exchange of India Limited and BSE Limited to issue a maximum of 4,000,000 equity shares with a face value of ? 1/- each, under the Zen Technologies Limited Employee Stock Option Plan-2021.

To facilitate the implementation of the ESOP scheme, the ESOS trust borrowed funds of ? 10 Crores from the Company, as approved by the Board of Directors on 30 October 2021. The trust utilized these funds to purchase 4,81,524 shares

from the secondary market, with a total consideration of ? 966.13 lakhs, for allocation to eligible employees under the ESOS scheme. As of 31 March 2023, these shares were acquired.

During the Nomination and Remuneration Committee meeting on 21 February 2023, it was decided, in compliance with the Zen Technologies Limited Employee Stock Option Plan-2021 and relevant laws and regulations, to grant 2,70,900 Employee Stock Options (ESOPs) to eligible employees as identified and determined by the committee. The exercise price for these options is set at ? 100/- (Rupees Hundred Only) per option.

In the standalone financial statements, the Company had adopted the policy of consolidating the ESOP Trust, the related loan and advances appearing in the standalone financial statements of the Company were eliminated and investment in own shares the Company held by the trust is shown as treasury shares in "other equity".

As at31 March 2023, the ESOP Trust purchased 4,81,524 shares from secondary market for an aggregate consideration of ? 966.13 lakhs.

45. EXCEPTIONAL ITEMS

During the previous year Company filed total insurance claim of ? 712.00/- lakhs, Out of which entity received an ad-hoc amount of ? 200.00/- lakhs and the total insurance claim has been revised to a total of ? 656 lakhs under the assessment with Insurance Company against the claim lodged with reference to a loss of property plant and equipment that were destroyed due to a fire at the Company''s Demonstration Centre located at Maheshwaram Hardware Park near Shamshabad Airport on 30 November 2021. As on 31 March 2023, Company has not received any approval/ acknowledgement of claim from Insurer for the balance amount of? 456.00/- lakhs. Hence, the claim receivable from the insurer

is not accounted which is in line with the provisions of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets.

The entity has recognised the expenditure incurred in the process of replacing the assets lost and renovation of building which is damaged and the same has been accounted as Capital work in progress (Refer Note 4C) after capitalization of identifiable items which are ready for intended use by the management.

Further, Company has recognised the loss of ? 27.96 lakhs pertaining to a loss of property plant and equipment under exceptional items in the Statement of Profit and Loss during the previous year 2021-22.

Note A: There is an increase in advances received from customers. As a result, there is an increase in Current Liabilities and decrease the current ratio from Previous year

that can be attributed to the fact that the substantial portion of the sales made during this period were covered by advance payments received from customers.

Note G: During the year, there has been no significant increase in average trade payables and with higher sales, material consumption for the year has also increased resulting into an increase in the trade payable turnover ratio.

Note H: Revenue growth along with higher efficiency on working capital improvement has resulted in an improvement in the ratio.

Note I: Due to new orders, favourable market conditions which resultant to increase in revenue from operations with better operation performance leads to increase in net profits during the year

Note J: Due to increase in profit before interest and tax during the year because of revenue is recognised after performing obligations under contracts.

*The Company is not having any market linked investments.

Note B: With the reduction in total debt during the year and increase in shareholders'' equity on account of higher profits despite adjustment of treasury shares during the year, the ratio has decreased compared to previous year

Note C: Due to repayment of borrowings related to debt component of Compulsory Convertible Debentures (CCD''s) which were issued during the FY 2021-22, there is a decrease in Debt service coverage ratio in current year

Note D: Improved due to increase in PAT on account of increase in Revenue from operations, relatively lower fixed overheads.

Note E: Due to normalizing of inventories based on the increase in capacity utilisation in the current year

Note F: Due to Significant increase in revenue from operations whereas the trade receivable ratio did not reflect a proportional rise

47. DIVIDEND PROPOSED AND PAID

The final dividend on shares is recorded as a liability on the date of the approval by the shareholders. The Company declares and pays dividends in Indian Rupees. Companies are required to pay/distribute dividend after deducting applicable withholding income taxes. The remittance of dividends outside India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates

During the year ended 31 March 2023, on account of final dividend for FY 2021-22, the Company has incurred a net cash outflow of ? 79.23 lakhs. The Board of Directors at its meeting on 06 May 2023, recommended a final dividend of ? 0.20/- per equity share for the financial year ended 31 March 2023. This payment is subject to the approval of shareholders in the ensuing Annual General Meeting (AGM) to be held in September 2023 and if approved, equity shares for considering dividend would include conversion of Compulsorily Convertible Debenture (CCD''s) & Convertible warrants which is due on before 24 May 2023 as stated in Note-48 which would result in a net cash outflow of approximately ? 168.09 lakhs.

48. COMPULSORILY CONVERTIBLE DEBENTURES

On 25 November 2021, the Company has made a preferential allotment of 40,64,267 10% Compulsorily convertible debentures having face value of ? 213/- each, for cash, for an aggregate amount of up to ? 86,57,65,551/-, which shall be converted into equal number of equity shares of ? 1/- each at a premium of ? 212/- within a period of 18 months.

We have accounted this instrument as per Ind AS 109. Financial Instruments, by considering the same as Compound Financial Instrument. This instrument consists of 2 components.

1) Mandatory interest payment by the Company for a fixed amount at a fixed future date and this component is treated as a Financial liability - Borrowings (Note-18 & 21). The financial liability is done by measuring the net present value of the discounted cashflows of interest payment. The discount rate we have considered is HDFC Bank''s CC Rate of interest which is 8.50% p.a as the same have tenure near to the CCD''s.

2) As the holder of the instrument has the option to convert the CCDs into Equity shares on or before 18 months and even in case of holder not exercising the conversion option before 18 months, each CCD''s shall be automatically be converted into Equity share of ? 1/- each at a premium of ? 212/- on the last date of the 18 month i.e 24 May 2023 without any action of the investor Hence we have treated this component as a equity and presented the same under "Other Equity" in Note 17.7. The carrying amount of the equity instrument is determined by deducting the fair value of the financial liability from the fair value of the CCDs as a whole.

51. OTHER STATUTORY INFORMATION

(i) The Company does not hold any Investment Property.

(ii) The Company has not revalued its property, plant and equipment and intangible assets during the year

(iii) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder

(iv) The Company has not been declared as wilful Defaulter by any bank or financial institution or other lender

(v) The Company do not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

(vi) The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

(vii) The Company have not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries); or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(viii) The Company have not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries); or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(ix) The Company have not traded or invested in Crypto currency or Virtual Currency during the financial year

(x) The Company have not any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.)

(xi) The Company has borrowings from banks, secured by hypothecation of inventories and by charge on book debts and other assets of the Company, and quarterly returns or statements of current assets filed by the Company are in agreement with books of accounts without any material discrepancies.

52 .Previous year figures have been reclassified/regrouped to confirm to those of current year.

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Mar 31, 2018

Note 37: There are no disclosures required to be made under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 as there are no outstanding amounts remaining unpaid at the end of the year.

Note 38: As per companies Act, 2013 Secction 148 Cost Audit Applicability, cost compliance is not applicable for FY 2017-18 as ZEN is Small Scale Industry Under MSME.

Note 39: The Company has transferred Rs 21.16 Lacs to M/s. Veer Sammaan Foundation under Corporate Social Responsibility (CSR) activity for the financial year 2017-18. Calculation of CSR Expenses

Average net profit of the Company for the last three financial years

					(Rs in lacs)
Financial Year	2014-15	2015-16	2016-17	Total	Average of 3
					Years
Profit before tax	1981.60	291.83	900.15	3,173.58	1,057.86

Prescribed CSR expenditure (2% of Average Net Profits): Rs 21.16 Lacs

40. Foreign Currency Expenses		(Rs in lacs)
Particulars	2017-18
Capital Goods	3.28	0.16
Raw Materials and Components	80.37	128.85
Stores and Spares	49.42	3.89
Foreign Travel (Exclusive of tickets purchased)	99.36	75.47
Membership	5.77	5.98
Professional charges	9.56	188.47
Exhibition Expenses	75.89	77.43
Training charges	-	6.01
Others	200.84	1.19
Total	524.49	487.45

41. Value of Imported and indigenous raw materials and components consumed				(Rs. in lacs)
Particulars			2016-17
		%	Value	%
Indigenous raw material and stores	402.60	83.36	1069.14	89.24
Imported stores and components	80.37	16.64	128.85	10.76

42. The company measures EBITDA on the basis of profit/(loss) from continuing operations and the company does not include depreciation and amortization expense, finance costs and tax expense in the measurement of EBITDA.

43. Events after the reporting period

The board has recommended dividend of 10% i.e. Rs 0.10 per eguity share of face value of Rs 1 each (March 31, 2017 Rs 0.15) for financial year 2017-18.

44. Recent accounting pronouncements

Standards issued but not yet effective and not early adopted by the Company:

Ind AS 115, Revenue from Contracts with Customers In March 2018, the Ministry of Corporate Affairs ("MCA") has notified Ind AS 115, Revenue from Contracts with Customers, which is effective for accounting periods beginning on or after 1 April 2018. This comprehensive new standard will supersede existing revenue recognition guidance, and requires an entity to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.

Ind AS 115 is effective for annual reporting periods beginning on or after 1 April 2018.

The Company intends to adopt Ind AS 115 effective 1 April 2018, using the modified retrospective method. The adoption of Ind AS 115 is not expected to have a significant impact on the Company''s recognition of revenues from product sales, service income and license fee.

Other Amendments:

On 28 March 2018, the MCA, issued certain amendments to Ind AS. The amendments relate to the following standards:

Ind AS 21, The Effects of Changes in Foreign Exchange Rates Ind AS 12, Income Taxes

Ind AS 28, Investments in Associates and Joint Ventures Ind AS 112, Disclosure of Interests in Other Entities

The amendments are effective 1 April 2018. The Company believes that the aforementioned amendments will not materially impact the financial position, performance or the cash flows of the Company

The accompanying notes are an integral part of the financial statements

As per our report of even date	For and on behalf of the Board
For Sekhar & Co
Chartered Accountants
FRN:003695-S	Ashok Atluri	M. Ravi Kumar
	Chairman & Managing Director	Whole Time Director
	DIN:00056050	DIN: 00089921
G. Ganesh	M Satish Choudhury	N. Ramesh Kumar
Partner	Company Secretary	Chief Financial Officer
M.No:211704	M.No. A30204
Place: Hyderabad
Date: 26 May, 2018

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Mar 31, 2016

b. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1/- each. 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 Director''s is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended 31 March 2016, the amount of per share dividend recognized as distributions to equity sharesholders was Rs. 0.10/- (previous year Rs. 0.35)

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Mar 31, 2015

1. Overdraft facilities from banks are secured by way of pledge of Fixed Deposits and the working capital facilities (Rs. 15 Crore) from Indian bank are secured by equitable mortgage of immovable properties and other fixed assets pari-pasu charge with Technology Development board (TDB).

2. The Company operates in one segment i.e., Training and simulation.

3. The Common expenses incurred at Head Office were allocated between Head Office and Himachal Pradesh unit based on Net turnover.

4. All Fixed deposits were kept with Scheduled banks only.

5. Receivables do not include any amount due and recoverable from directors or other officers of the Company, or Companies under the same management.

6. The balances of Sundry Debtors, Creditors and advances in various personal accounts are subject to reconciliation and conformation with the concerned parties.

7. There are no disclosures required to be made under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 as there are no outstanding amounts remaining unpaid at the end of the year.

8. In respect of Chits of Margadarsi Chit Fund, profit / loss on account of two chits will be accounted at the time of completion of chits.

9. Corporate Social Responsibility (CSR) amount is worked out to Rs. 30,05,500/- at 2% average of preceding 3 financial years profits. Out of this, Company has already spent Rs. 5,11,600/- and the balance of Rs. 24,93,900/- will be spent.

10. None of the pending litigations have any impact on Company's financial position.

11. As per Cost Audit applicability, cost compliance is not applicable for FY 2014-15 as the Company is classified as small enterprise under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

12. The company measures EBITDA on the basis of profit/(loss) from continuing operations and the company does not include depreciation and amortization expense, finance costs and tax expense in the measurement of EBITDA.

13. In the opinion of Board of Directors, the current assets, loans and advances are expected to realize approximately the value stated in the ordinary course of business.

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Mar 31, 2014

1. CORPORATE INFORMATION

Zen Technologies Limited is a public company incorporated under the provisions of the Companies Act, 1956 having corporate office at B-42, Industrial Estate, Sanathnagar, Hyderabad-500018, India. The Equity Shares of the Company are listed on BSE Limited, Mumbai. The Company is engaged in design, development and manufacture of Training Simulators for Police and Para-military Forces, Armed Forces, Security Forces, Government Departments like Transport, Mining, Infrastructure and Civilian market. The company caters to both domestic and international market. The Company is having two manufacturing units- 1) Hardware Park, Maheswaram Mandal, Andhra Pradesh, India and 2) Nalagarh, Dist Solan, Himachal Pradesh, India.

(in Rs.)

Note Year ended Year ended

Particulars 31 March 2014 31 March 2013

1.2 COMMITMENTS AND CONTINGENT LIABILITIES NOT PROVIDED FOR IN RESPECT OF

I. DISPUTED MATTERS

(a) Appeal filed by the Excise Department before the Customs, Excise 5,171,356 5,171,356 and Service Tax Appellate Tribunal (CESTAT) Bangalore against the decision of adjudication by Commissioner of Customs and Central Excise Hyderabad - II Commissionerate, in favour of the company pertaining to Excise matter in Order No:02/2006-C.Ex

(b) Subsequent demands raised by the excise authority, pending 74,942,371 74,942,371 decision of the case in (a) above, being disputed by the company

80,113,727 80,113,727

Note: The dispute in the matter (a) above was relating to inclusion of customized software in the valuation of simulators supplied by the Company during the period from F.Y 2005-06 to 2010-11 (upto 31.07.2011). The matter was first adjudicated by the Commissioner of Customs and Central Excise Hyderabad - II Commissionerate and decided in favour of the Company. However, the Excise Department has filed an appeal before the Appellate Tribunal challenging the order passed by Commissioner of Customs and Central Excise. The Company, based on discussions with its solicitors and tax advisors, believes that there is a fair chance of winning the case in its favour in the appellate process and hence, no provision has been considered necessary against the same.

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Mar 31, 2013

1 CORPORATE INFORMATION

Zen Technologies Limited is a public company incorporated under the provisions of the Companies Act, 1956 having corporate office at B-42, Industrial Estate, Sanathnagar, Hyderabad-500018, India. The Equity Shares of the Company are listed on Bombay Stock Exchange (BSE) in India. The company is engaged in design, development and manufacture of Training Simulators for Police and Para-military Forces, Armed Forces, Security Forces, Government Departments like Transport, Mining, Infrastructure and Civilian market. The company caters to both domestic and international market. The Company is having two manufacturing units- 1) Hardware Park, Maheswaram Mandal, Andhra Pradesh, India and 2) Nalagarh, Dist Solan, Himachal Pradesh, India.

2.1 Overdraft facilities from banks are secured by way of pledge of Fixed Deposits.

2.2 The Company operates in one segment i.e., Training and Simulation.

2.3 The Common expenses incurred at Head Office were allocated between Head Office and Himachal Pradesh unit based on Net Turnover.

2.4 All Fixed deposits were kept with Scheduled Banks only.

2.5 The unclaimed dividend amount for all the earlier financial years as on 31 March 2013 is Rs. 9,81,785.00, details of which are given below:

2.6 Receivables do not include any amount due and recoverable from Directors'' or other Officers'' of the Company, or Companies under the same management.

2.7 The balances of Sundry Debtors, Creditors and advances in various personal accounts are subject to reconciliation and conformation with the concerned parties.

2.8 There are no disclosures required to be made under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 as there are no outstanding amounts remaining unpaid at the end of the year.

2.9 The company measures EBITDA on the basis of profit/(loss) from continuing operations and the company does not include depreciation and amortization expense, finance costs and tax expense in the measurement of EBITDA.

2.10 In the opinion of Board of Directors, the current assets, loans and advances are expected to realize approximately the value stated in the ordinary course of business.

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Mar 31, 2012

A. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 10 each. Each holder of equity share 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.

During the year ended 31 March 2012, the amount of per share dividend recognized as distributions to equity sharesholders was Rs.6.50 (previous year : Rs.1.50)

Note:1 Term loan facility from Indian Bank is secured by equitable mortgage of Company's immovable properties and hypothecation of other fixed assets with respective loan agreements. The term loan was utilised for the purpose of constructing factory premises at Hardware Park in Maheswaram Mandal, Hyderabad. The loan carries interest @13% p.a. The loan is guaranteed by personal guarantee of the Managing Director of the Company.

Note:2 The company has availed term loan from Technology Development Board (TDB), Ministry of Science and Technology, Govt of India as a part-finance for design, development and commercialization of Zen Driving Training Simulator for Overseas market. The loan carries interest @5% p.a and is repayable in 9 half yearly installments commencing from 01-04-2012. The loan is secured by equitable mortgage of immovable properties and other fixed assets pari-passi charge with Indian Bank. The loan is also guaranteed by corporate own guarantee and pledging of company's equity shares of 3,11,140 nos owned by the Managing Director of the company.

Note: The company operates Employees Gratuity Scheme for its employees. Under the scheme of gratuity, every employee who has completed minimum 5 years of service gets gratuity on departure @ 15 days last month's drawn basic salary for each completed year of service. The gratuity scheme is funded with Life Insurance Corportaion of India in the form of Group Gratuity Scheme (GGS). The provision is estimated by an independent consulting actuary as per requirements of (AS) 15 (Revised 2005) as prescribed under The Companies (Accounting Standard) Rules, 2006.

Note: As the items of raw material purchased and consumed are dissimilar in nature, type and numerous in quantity, it is not posible to give details under different heads as required under para 5(II) and para 5(III) of the general instructions for preparation of the statement of profit and loss as per the Revised Schedule VI of the Companies Act, 1956.

Note: As the items of finished goods produced or under production are heterogeneous in nature, model, type and specification, it is not posible to give details under different heads as required under para 5(II) and para 5(III) of the general instructions for preparation of the statement of profit and loss as per the Revised Schedule VI of the Companies Act, 1956.

Note: Tax expense comprises current and deferred tax. The current tax represents the Minimum Alternate Tax (MAT) payable by the company on the book profits for the year. Current tax expense is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 and the tax rates and tax laws used to compute the tax amount are prevailing at the reporting date. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years.

The dispute in the matter (a) above was relating to inclusion of customized software in the valuation of simulators supplied by the company during the period from F.Y 2005-06 to 2010-11 (upto 31- 07-2011). The matter was first adjudicated by the Commissioner of Customs and Central Excise, Hyderabad - II Commissionerate and decided in favour of the company. However, the Excise Department has filed an appeal before the Appellate Tribunal challenging the order passed by Commissioner of Customs and Central Excise. The Company, based on discussions with its solicitors and tax advisors, believes that there is a fair chance of winning the case in its favour in the appellate process and hence, no provision has been considered necessary against the same.

NOTES ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012

1 CORPORATE INFORMATION

Zen Technologies Limited is a public company incorporated under the provisions of the Companies Act, 1956 having corporate office at B-42, Industrial Estate, Sanathnagar, Hyderabad-500018, India. The Equity Shares of the Company are listed on Bombay Stock Exchange (BSE) in India. The company is engaged in design, development and manufacture of PC based Training Simulators for Police and Para-military Forces, Armed Forces, Other Security Forces, Government Departments (like Transport) and Civilian market etc., The company caters to both domestic and international market. The Company is having two manufacturing units located in India: 1) Hardware Park, Maheswaram Mandal, Andhra Pradesh and 2) Nalagarh District Solan, Himachal Pradesh.

2.1 Overdraft facilities from banks are secured by way of pledge of Fixed Deposits.

2.2 The Company operates in one segment i.e., Training simulation.

2.3 The Common expenses incurred at the Head Office were allocated between Head Office and Himachal Pradesh unit based on Net turnover.

2.4 The advances totaling to Rs. 155.30 lakhs given to Autostart Driving School Pvt Ltd has been written-off as unrecoverable.

2.5 The advances totaling to Rs. 405.05 lakhs given to wholly owned subsidiary Version 2 Games Limited has been written-off as unrecoverable.

2.6 Sundry debtors totaling to Rs. 254.56 lakhs including the amount due from the wholly owned subsidiary Version 2 Games Limited Rs. 134.10 lakhs has been written-off as unrecoverable.

2.7 The advances totaling to Rs. 72.60 lakhs given to wholly owned subsidiary Zen Technologies FZE, UAE has been written-off as unrecoverable.

2.8 A provision has been made for an amount of Rs. 216.01 lakhs being doubtful of recovery from Hercules Manufacturing Nigeria Limited against sale of customized software.

2.9 A provision has been made for an amount of Rs. 32.50 lakhs on the sale of Tanks made to Ministry of Defence for installation, training and maintenance.

2.10 All Fixed deposits were kept with Scheduled banks only.

2.11 The unclaimed dividend amount for all earlier financial years as on 31 March 2012 is Rs. 8,00,093, details of which are given below:

2.12 Receivables do not include any amount due and recoverable from Directors' or other officers' of the Company, or Companies under the same management.

2.13 The balances of Sundry Debtors, Sundry Creditors and advances in various personal accounts are subject to reconciliation and confirmation with the concerned parties.

2.14 There are no disclosures required to be made under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 as there are no outstanding amounts remaining unpaid at the end of the year.

2.15 The company measures EBITDA on the basis of profit/(loss) from continuing operations and the company does not include depreciation and amortization expense, finance costs and tax expense in the measurement of EBITDA.

2.16 In the opinion of Board of Directors, the current assets, loans and advances are expected to realize approximately the value stated in the ordinary course of business.

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Mar 31, 2011

1. Contingent Liabilities:

Particulars 2010-11 2009-10

Contingent Liabilities in respect of Bank Guarantees Rs.500 lakhs Rs.533.17 lakhs

2. There are no disclosures required to be made under the Micro, Small and Medium Enterprises Development (MSEMED) Act, 2006 as there is no outstanding amount remaining unpaid at the end of the year.

3. Related party transactions

As per Accounting Standard - 18 on Related Party disclosures issued by the Institute of Chartered Accountants of India the disclosure of transactions with the Related Party as defined in the Accounting Standard are given below:

i) List of Related Parties and Nature of Relationship:

Key Management Personnel

1 Mr Ashok Atluri

2 Mr Ravi Kumar Midathala

Relative of Key Management Personnel

3 Mr Kishore Dutt Atluri

4. The balances of Sundry Debtors, Creditors and advances in various personal accounts are subject to confirmation by and reconciliation with the concerned parties.

5. In the opinion of Board of Directors, the current assets, loans and advances are expected to realize approximately the value stated in the ordinary course of business.

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Mar 31, 2010

1. Contingent Liabilities:

Particulars 2009-10 2008-09

Contingent Liabilities in respect of Bank Guarantees Rs.533.17 lakhs Rs.135.56 lakhs

2 Previous years figures are regrouped and rearranged wherever necessary. vii Figures have been rounded off to the nearest rupee.

3. List of SSI Units to whom amount is due for more than 30 days as on 31st March, 2010 is Rs.NIL (Previous year Rs. NIL/-)

4. The balances of Sundry Debtors, Creditors and advances in various personal accounts are subject to confirmation by and reconciliation with the concerned parties.

5. In the opinion of Board of Directors, the current assets, loans and advances are expected to realize approximately the value stated in the ordinary course of business.