DIRECTORS’ REPORT - lnt.in · S-513 L&T KOBELCO MACHINERY PRIVATE LIMITED DIRECTORS’ REPORT...

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L&T KOBELCO MACHINERY PRIVATE LIMITED

DIRECTORS’ REPORT

Your Directors have pleasure in presenting the Third Report and Audited Accounts for the year ended March 31, 2013.

FINANCIALS & PEFORMANCE OF THE COMPANY: R in Million

Particulars 2012-13 2011-12

Gross Income 162.8 164.6

Profit (Loss) before depreciation, interest and tax (59.3) (3.9)

Less: Depreciation 33.4 6.0

Interest 44.8 7.0

Profit (Loss) before taxes (137.6) (16.9)

Provision for taxes

Income Tax –- 3.0

Deferred Tax –- –

Profit (Loss) after tax (Carried over to Balance Sheet) (137.6) (19.9)

DIVIDENDThe Directors do not recommend any dividend for the year ended March 31, 2013.

REVIEW OF OPERATIONS:The Company has set up a state of the art factory at Karai Village, Kanchipuram to manufacture Internal Mixers and Twin Screw Roller Head Extruders for the tyre industry and commenced its commercial operations during the Financial Year 2011-12. The Company’s export sales were v 86.2 Million and domestic sales were v 52 Million during the current Financial year. The Company has good growth prospects in the future considering the growth in the tyre industry.

CAPITAL EXPENDITURE:During the year, the Company incurred Capital Expenditure of R 291.6 Million on both tangible and intangible assets excluding Capital advances.

BORROWINGS:During the year the Company availed a Pre-shipment Credit in Foreign Curency Loan of R 18.7 Million for Working Capital requirement and R 86.4 Million as Term Loan for purchase of Fixed Assets (Tangible and Intangible) from HDFC Bank Limited, Chennai. The total borrowing is secured by Equitable Mortgage of Land and Building and hypothecation of Plant and Machineries and the Working Capital borrowing is secured by Inventory and Book debts of the Company. The Term Loan includes both Rupee term loan and Buyers’ Credit availed in Foreign Currencies like EURO, US $ and JPY.

DEPOSITS:During the year the Company has not accepted any deposits from the public.

AUDITORS’ REPORT:The Auditors’ Report does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further comments of Directors.

MATERIAL CHANGES, IF ANY, BETWEEN BALANCESHEET DATE AND DATE OF DIRECTORS REPORT:There were no material changes between the Balance Sheet date and date of Directors report.

DISCLOSURE OF PARTICULARS:Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo, is provided in Annexure A forming part of this Report.During the year, the Company has undergone the final audit for certification of its Quality, Environment and Occupational Health and Safety under ISO 9001, ISO 14001 and BS 18001. The certificate is awaited. Kobe Steel Limited carried out an audit of the Company’s systems for environment management.

PERSONNEL:The Board of Directors wishes to express their appreciation to all the employees for their outstanding contribution to the operations of the Company during the year.

There are no employees covered by the provisions of the Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

SUBISIDIARY COMPANIES:The Company does not have any subsidiary company.

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DIRECTORS’ RESPONSIBILITY STATEMENT:The Board of Directors of the Company confirms:i. That in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no material

departure;ii. That the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonable and

prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profits (Loss) of the Company for the period ended on that date;

iii. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. That the annual accounts have been prepared on a going concern basis; andv. That the Company has adequate internal systems and controls in place to ensure compliance of laws applicable to the Company.

DIRECTORS:Mr. S. Venkataraman, Director retires from the Board by rotation and is eligible for re-appointment at the forthcoming Annual General Meeting. The Notice convening the Annual General Meeting includes the proposals for re-appointment of Directors.

Mr. Akio Matsuda, Director retires from the Board by rotation and is eligible for re-appointment at the forthcoming Annual General Meeting. The Notice convening the Annual General Meeting includes the proposals for re-appointment of Directors.

SEPARATION OF OFFICES OF CHAIRMAN & CHIEF EXECUTIVE:The roles and offices of Chairman and Chief Executive are separated. Mr. S. Raghavan chairs the meetings of the Board whereas Mr. S. Srinivasan, designated as the Manager is the Chief Executive of the Company who controls the day to day affairs of the Company.

NOMINATION AND REMUNERATION COMMITTEE:The Company has a Nomination and Remuneration (N&R) Committee comprising of majority of Independent Directors. The Composition is given below:

NAME DESIGNATION

Mr. S. R. Subramanian Member

Mr. S. Venkataraman Member

Mr. Noboru Oyama Member

Mr. Yosuke Nishio Member

REMUNERATION OF DIRECTORS:The remuneration policy of Managerial personnel is decided by the N&R Committee. The Directors are not paid sitting fees for attending the meetings of the Board and Committee thereof nor any other Remuneration.The structure of pay for senior management and other employees is based on the Company policy evolved over a period of time. The objectives of the remuneration policy are to motivate the employees to excel in their performance; recognize their contribution, retain talent and reward merit. Remuneration of employees largely consists of base remuneration and performance incentives. The component of remuneration vary for different grades and are governed by industry pattern, qualifications, experience, responsibilities handled, individual performance etc. Periodical presentations are made to the N&R Committee and the Board on HR policies.

INDEPENDENT DIRECTORS:All the members of the Board of the Company are Independent in the sense that none of them are involved in the day-to-day management of the Company.

NUMBER OF COMPANIES IN WHICH AN INDIVIDUAL MAY BECOME A DIRECTOR:The Company has apprised the board members about the restriction on number of other directorships and expects in due course to comply with the same.

RESPONSIBILITIES OF THE BOARD:Presentations to the Board in areas such as financial results, budgets, business prospects etc. give the Directors an opportunity to interact with senior managers and other functional heads. Directors are also updated of their role, responsibilities and liabilities.The Company ensures necessary training to the Directors relating to its business through formal/ informal interactions. Systems, procedures and resources are available to ensure that every Director is supplied, in a timely manner, with precise and concise information in a form and of a quality appropriate to effectively enable/ discharge his duties. The Directors are given time to study the data and contribute effectively to Board discussions. The Directors through their interactions and deliberations give suggestions for improving overall effectiveness of the Board and its Committee. Their inputs are also utilized to determine the critical skills required for prospective candidates for election to the Board. The system of risk assessment and compliance with statutory requirements are in place.

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AUDITORS:The Auditors, M/s PKF Sridhar & Santhanam, hold office until the conclusion of the ensuing Annual General Meeting The Directors recommend that M/s PKF Sridhar & Santhanam be re-appointed as the statutory Auditors of the Company at the forthcoming Annual General Meeting of the Company to hold office till the conclusion of the next Annual General Meeting of the Company.

INTERNAL AUDIT:The Corporate Audit Services department of Larsen & Toubro Limited provides internal audit services to the Company.

SECRETARIAL AUDIT:The Secretarial Audit, at regular intervals, is conducted by the Corporate Secretarial department of Larsen & Toubro Limited, which has competent professionals to carry on the said audit.

ACKNOWLEDGEMENT:The Directors acknowledge the invaluable support extended to the Company by the Central and State Government Authorities, the Regulatory Authorities, the Stakeholders, the Bankers, the Suppliers and the Customers.The Directors are pleased to place on record their appreciation for the valuable contribution made by the employees of the Company and also wish to record their appreciation for their continued co-operation and support received from the Joint Venture Partners and their employees.

For and on behalf of the Board

S. R. SUBRAMANIAN Chairman

Place: Karai, Kanchipuram, India

Date: April 16, 2013

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ANNEXURE A TO THE DIRECTORS’ REPORT(Additional information given in terms of notification issued by the Ministry of Corporate Affairs)

[A] CONSERVATION OF ENERGY:

a) Energy Conservation measures: • Sufficient sky lights provided in the roof and side walls in Mezzanine Office area to reduce Electricity Consumption.

• Centralised Energy Management system will be operational from June 2013 to monitor the energy meter to ensure optimum utilization power.

• Additional three solar street fixed in the factory to have better vigilance system in the nights. The annual energy savings is expected around 11000 units with a cost saving of around V 0.1 Million.

• 100 Watts LED LOGO installed in the front entrance of the factory in the place of 380 Watts Neon lighting to save power. Similarly 50 Watts LED lighting provided at the entrance of the Factory to eliminate 500 Watts Halogen Flood Lighting.

• Shop floor emergency lighting supported with 10 KVA UPS. Intermittent roof lights are covered in this scheme to provide minimum lighting in machine shop, fabrication & Assembly shop during Peak hour restriction power cut period.

b) Future Plan • TAMIL Nadu Government released a Notification for utilization of Solar Energy in the future. The Company has planned to utilize the

opportunity in the next financial year 2013-14 to the extent possible to reduce the Electric energy.

[B] TECHNOLOGY ABSORPTION:

1. Technology absorption and adaptation. The Company worked on absorption of technology received from Kobe Steel, LTD (KSL).

Technology, Design and Drawings Technical Drawings of 4 models of mixers and 2 models of extruders received from KSL The Company manufactured and sold two models

during the current financial year 2012-13.

Conversion of drawings to LTKM format for the other two models is expected to be completed by end of First Quarter 2013-14.

Drawings received from KSL for critical components and the Company successfully manufactured and sold the product using the technology.

The full manufacturing facility was made available during the Financial Year 2012-13 and established the Manufacturing process for Mixer and Extruders.

Developed vendors for critical bought out components like motor, Gear box, drive panel, hydraulic power pack and blower etc., completed.

2. Benefits expected / derived as a result of above Technology Acquisition • Product development.

• Increase in know-how within the country.

• Introduction and expansion of Product range.

• Export opportunities

• Win-over competition

• Development of in-house capability for advanced engineering studies in rubber mixing and extrusion.

• Successful testing / commissioning of plants and equipment in projects through multi-disciplinary technology support.

• Ability to quickly offer new products for the Tyre manufacturing units and other rubber products manufacturers for varied requirements and position our products well against offering by global players.

• Indigenization and development of products.

• Introduction of new products with a focus on achieving global acceptance, enhancing safety and user convenience, environment friendly features, built in intelligence and communication capability and conformance to latest Indian and International Standards.

3. Future Plan of Action Indigenize balance components for Rubber Processing Machinery by designing, developing specifications and adapting to Indian

Conditions.

4. Expenditure on Technology Absorption

(a) Capital - Technical Know How and Computer Software - Current Year R 30.7 Million. (Previous Year RNIL)

(b) Recurring (Training, Travel etc.,) - R 2 Million (Previous Year R 3.8 Million)

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(c) Total expenditure on Technology Absorption as a percentage of turnover 22%

[C] FOREIGN EXCHANGE EARNINGS AND OUTGO:

(1) Activities relating to exports:

Initiatives taken to increase exports;

Development of new export markets for product and services; and export plans

Both marketing agents L&T and KSL reached out to tyre manufacturers in their territory promoting Company’s products. Export orders have been procured in their territories.

(2) Total Foreign Exchange used and earned

Total Foreign Exchange used (Imports of goods and services) V 145.9 Million (Previous Year V 194.8 Million.

Total Foreign Exchange earned V 86.1 Million (Previous year V 110.4)

For and on behalf of the Board

S. R. SUBRAMANIAN Chairman

Place: Karai, Kanchipuram, India

Date: April 16, 2013

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INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF L&T KOBELCO MACHINERY PRIVATE LIMITED

Report on the Financial StatementsWe have audited the accompanying financial statements of L&T KOBELCO MACHINERY PRIVATE LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is suficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of afairs of the Company as at March 31, 2013,

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements1. As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the CentralGovernment of India in terms of sub-section

(4A) of Section 227 of the Act, we give in the Annexure astatement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

(b) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

(c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of Section 211 of the Companies Act, 1956;

(e) On the basis of written representations received from the directors as on March 31, 2013, and takenon record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from beingappointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act,1956.

(f) Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under Section 441A of the Companies Act, 1956 nor has it issued any Rules under the said Section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

For PKF SRIDHAR & SANTHANAMChartered AccountantsFirm Regn No. 03990S

S. RAJESHWARIPartner

Membership No. 24105Place: ChennaiDate: April 19, 2013

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ANNEXURE TO THE AUDITORS’ REPORTReferred to in paragraph 1 on ‘Report on Other Legal and Regulatory Requirements’ of our report of even date

(I) (a) the Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) these fixed assets have been physically verified by the management at the year end and no material discrepancies were noticed;

(c) The Company has not disposed off, any substantial part of fixed assets during the year;

(ii) (a) physical verification of inventory has been conducted at reasonable intervals by the management;

(b) the procedure of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business;

(c) the Company is maintaining proper records of inventory. Discrepancies noticed on physical verification were not material and have been properly dealt with, in the books of account;

(iii) According to the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clause iv(iii)(a) to (g) of the Order are not applicable to the Company and hence not commented upon.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventories, fixed assets and for sale of goods. During the course of our audit, we have not observed or been informed of a continuing failure to correct major weakness in internal control system of the Company in respect of these areas;

(v) According to information and explanations provided by the management, we are of the opinion that there are no contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under that Section;

(vi) In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public to which the directives issued by the Reserve Bank of India and the provisions of Sections 58A and 58AA of the Act and the rules framed there under are applicable.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) In our opinion and according to the information and explanations given to us, cost records prescribed by the Central Government under clause (d) of sub-section (1) of Section 209 of the Act has been maintained;

(ix) (a) The Company has been regular in depositing undisputed statutory dues including Excise duty, VAT, Provident Fund, Income-tax and Service Tax with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Excise duty, VAT, Provident Fund, Income-tax, Service Tax and other material statutory dues were outstanding at the year end for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no disputed dues outstanding as at the Balance Sheet date, of excise duty, VAT/Provident fund/income tax/custom tax/service tax/cess, remaining unpaid on account of any disputes.

(x) Being the third year of registration of the Company, reporting on accumulated losses in regard to the networth of the Company does not arise. The Company has made cash losses during the current year and previous year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank;

(xii) According to the information and explanations given to us and based on the documents and records produced before us, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause (xii) of paragraph 4 of the said Order are not applicable.

(xiii) In our opinion, the Company is not a chit fund/nidhi/mutual benefit fund/society. Accordingly, the provisions of clause (xiii) of paragraph 4 of the said order are not applicable;

(xiv) During the period under report, the Company has not dealt in or traded in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the said Order are not applicable;

(xv) To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions;

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us term loans were applied for the purpose for which they were obtained;

(xvii) In our opinion and according to the explanations given to us and on an overall examination of the Balance Sheet of the Company, funds raised on a short-term basis have not been used for long term investment;

(xviii) According to the information and explanations given to us, during the period under report, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956;

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(xix) The Company has not issued any debentures during the period under report. Accordingly, the provisions of clause (xix) of paragraph 4 of the said Order are not applicable.

(xx) The Company has not raised money by public issues. Accordingly, the provisions of clause (xx) of paragraph 4 of the said order are not applicable;

(xxi) Based on the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per information and explanations given to us by the management, there have been no cases of fraud on or by the Company, noticed or reported during the period.

For PKF SRIDHAR & SANTHANAMChartered AccountantsFirm Regn No. 03990S

S. RAJESHWARIPartner

Membership No. 24105Place: ChennaiDate: April 19, 2013

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BALANCE SHEET AS AT MARCH 31, 2013

NoteNo.

As at 31.03.2013 As at 31.03.2012R R R R

EQUITY AND LIABILITIES

Shareholders' Funds

Share Capital 3 500,000,000 500,000,000

Reserves and Surplus 4 (147,277,472) (24,113,134)

352,722,528 475,886,866

Non-current liabilities

Long-term borrowings 5 309,093,863 252,656,480

Other long term liabilities 6 6,161,063 –

315,254,926 252,656,480

Current liabilities

Short-term borrowings 7A 18,763,650 –

Current maturities of long term borrowings 7B 30,000,000 –

Trade payables 7C 40,441,133 44,164,670

Other current liabilities 7D 83,308,068 33,968,957

Short-term provisions 7E 2,658,428 954,358

175,171,279 79,087,985

TOTAL EQUITY AND LIABILITIES 843,148,733 807,631,331

ASSETSNon Current Assets Fixed Assets Tangible Assets 8 571,467,673 338,531,790 Intangible Assets 9 48,381,208 23,108,369 Capital work-in-progress 8 2,468,322 110,284,386 Long-term loans and advances 10 21,742,184 53,468,424

644,059,387 525,392,969Current Assets Current investments 11 26,713,046 – Inventories 12 37,920,159 4,522,135 Trade receivables 13 66,768,428 89,513,030 Cash and bank balances 14 24,556,304 174,029,199 Short-term loans and advances 15A 28,766,412 14,173,998 Other current assets 15B 14,364,997 –

199,089,346 282,238,362

TOTAL ASSETS 843,148,733 807,631,331

SIGNIFICANT ACCOUNTING POLICIES 2

The accompanying notes are an integral part of the financial statements

As per our report of even date attached For and on behalf of the Board

For PKF SRIDHAR & SANTHANAMChartered AccountantsFirm registration no. 003990S

S. RAJESHWARIPartnerMembership No. 24105

Place : ChennaiDate : April 16, 2013

S. SRINIVASANManager

S. R. SUBRAMANIANDirector

NOBORU OYAMADirector


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STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2013

NoteNo.

Year ended 31.03.2013 Year ended 31.03.2012R R R R

INCOME

Revenue from operations (Gross) 16 144,593,543 142,477,400

Less: Excise Duty 6,355,816 3,370,448

Revenue from operations (Net) 138,237,727 139,106,952

Other Income 17 24,616,526 25,572,495

TOTAL REVENUE 162,854,253 164,679,447

EXPENSES

Cost of raw materials and components consumed 18 135,106,575 88,949,140

Purchase of trading goods 19 – 13,763,759

Sub-contracting charges 7,689,618 1,086,817

Changes in inventories of finished goods and work-in-progress

20 (12,419,453) –

Other Manufacturing and Operating Expenses 21 22,747,355 5,966,018

Employee benefits expense 22 39,973,132 31,259,427

Sales, Administration and other expenses 23 29,107,829 27,502,434

Depreciation and amortization expense 8,9 33,430,339 6,004,474

Finance Costs 24 44,819,310 7,072,135

TOTAL EXPENSES 300,454,705 181,604,204

LOSS BEFORE TAX (137,600,452) (16,924,757)

Current tax – 3,066,397

Deferred tax 29 – –

Total tax expense – 3,066,397

Loss for the year (137,600,452) (19,991,154)

Earnings per equity share

[nominal value of share R 10 (Previous year: R 10)]

Basic and Diluted (2.75) (0.50)

SIGNIFICANT ACCOUNTING POLICIES 2

The accompanying notes are an integral part of the financial statements









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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2013Year ended31.03.2013

R

Period ended31.03.2012

R

CASH FLOW FROM OPERATING ACTIVITIES

Net Loss before tax (137,600,452) (16,924,757)

Adjustments for:

Interest income (5,479,180) (13,046,759)

Interest expense 31,494,218 2,690,546

Net gain on sale of current investments (6,466,929) (2,258,006)

Depreciation and amortization expense 33,430,339 6,004,474

Unrealized Foreign exchange loss / (gain) 756,195 3,365,156

Operating Loss before working capital changes (83,865,809) (20,169,346)

Adjustments for:

(Increase) / Decrease in Trade and other receivables 26,011,958 8,205,538

Increase / (Decrease) in trade payables and other liabilities 75,352,176 44,801,540

Cash used in / generated from operating activities 17,498,326 32,837,732

Less: Taxes Paid (net) (572,672) (4,167,740)

NET CASH USED IN / GENERATED FROM OPERATING ACTIVITIES (A) 16,925,654 28,669,992

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (161,563,024) (410,133,130)

(Purchase) / sale of current Term Investments, net (20,246,117) 12,258,006

Interest received 5,479,180 13,046,759

NET CASH USED IN / GENERATED FROM INVESTING ACTIVITIES (B) (176,329,961) (384,828,365)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from fresh issue of Share capital – 200,000,000

Borrowings 105,201,033 250,407,070

Interest paid (30,182,808) (665,233)

NET CASH USED IN / GENERATED FROM FINANCING ACTIVITIES (C) 75,018,225 449,741,837

Effect of exchange rate in cash and cash equivalents (D) (132,830) 132,830

Net (decrease) / Increase in cash and cash equivalents (A + B + C +D) (84,518,912) 93,716,294

Cash & cash equivalents at the beginning of the year 98,897,736 5,181,442

Cash & cash equivalents at the end of the year 14,378,824 98,897,736









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NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012

1. BACKGROUND The Company is a Joint Venture Company between Larsen & Toubro Limited, India and M/s Kobe Steel, Ltd., Japan carrying on the business

of designing, engineering, manufacturing and sale of rubber processing machinery (Mixers and Twin screw roller head extruders) and spares.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Accounting The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accounting

principles (GAAP), in compliance with provisions of the Companies Act, 1956 and the Accounting Standards [as specified in the Companies (Accounting Standards) Rules, 2006, prescribed by the Central Government].

The presentation of financial statements in conformity with GAAP requires that the management of the Company makes estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating to the contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives of tangible and intangible fixed assets, future obligations in respect of retirement benefit plans etc., Difference if any, between the actual results and estimates, is recognized in the period in which the results are known.

2.2 Revenue Recognition Revenue is recognized based on nature of activity when consideration can be reasonably measured and there exists reasonable certainty of

its recovery.

a) Sales and Service – Sales and service include excise duty and adjustments made towards liquidated damages and price variation, wherever applicable. – Revenue from sale of goods is recognized when the substantial risks and rewards of ownership are transferred to the buyer under

the terms of the contract. – Revenue from service related activities is recognized as and when services are rendered.

b) Others – Other Operational income represents income earned from operating activities other than revenue arising from the sale of products

or rendering of services and is recognized when the right to receive the income is established as per the terms of contract. – Interest Income is accrued at applicable interest rate on time proportion basis. – Income from mutual fund investments is recognized when realized. – Other items of income are accounted as and when the right to receive arises.

2.3 Extraordinary and exceptional items Income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the Company are classified as

extraordinary items. Specific disclosure of such events/transactions is made in the financial statements. Similarly, any external event beyond the control of the Company, significantly impacting income or expense, is also classified as an extraordinary item and accordingly disclosed in the notes.

On certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company, is such that its disclosure improves an understanding of the performance of the Company. Such income or expense is classified as an exceptional item and accordingly disclosed.

2.4 Employee Benefits a) Short term employee benefits

All employee benefits falling due wholly within twelve months of rendering the service are classified as short term employee benefits. The benefits like Salaries, wages, short term compensated absences, etc., and the expected cost of bonus, ex-gratia, are recognized in the period in which the employee renders the related service.

b) Post- employment benefits (i) Defined Contribution Plans: The Company’s state governed provident fund scheme and insurance scheme are defined contribution plans. The contribution paid/

payable under the schemes is recognized during the period in which the employee renders the related service.

(ii) Defined benefit plans: – The employees’ gratuity fund scheme is the Company’s defined benefit plans. The present value of the obligation under such defined

benefit plans is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

– The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans, is based on the market yield on government securities, of a maturity period equivalent to the weighted average maturity profile of the related obligations at the Balance Sheet date.

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– Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

– The interest element implicit in the actuarial valuation of defined benefit plans is classified under interest expense and balance charge is recognized as employee benefits in the Statement of Profit and Loss.

– In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognise the obligation on the net basis.

c) Long Term Employee Benefits The obligation for long term employee benefits such as long term compensated absences is recognised in the similar manner as in the

case of defined benefit plans as mentioned in (b) (ii) above.

2.5 Fixed Assets - Tangible Fixed assets are stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation, accumulated amortisation and

cumulative impairment. Administrative and other general overhead expenses that are specifically attributable to construction or acquisition of fixed assets or bringing the fixed assets to working condition are included and capitalized as a part of the cost of the respective fixed assets.

2.6 Fixed Assets - Intangible Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise

and the cost of the asset can be measured reliably. Intangible assets are amortised as follows:

a) Lump sum fees for technical know-how: Over a period of six years from the date know-how is available for use.

b) Computer Software: Over the period of license or six years whichever is lower.

Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the intangible assets.

2.7 Leases (as lessee) Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating

leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis.

2.8 Depreciation “Depreciation on assets carried at cost is provided on the straight line method (at the rates prescribed under Schedule XIV to the Companies

Act, 1956 or at higher rates in line with the estimated useful lives of the assets).“Depreciation for additions to / deduction from assets is calculated pro-rata from / to the month of additions / deductions. Extra shift depreciation is provided wherever applicable. Individual assets costing R 5,000 or less are depreciated in full in the year of acquisition.”

2.9 Impairment As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine: a) the provision for impairment loss, if any; or b) the reversal of impairment loss recognised in previous periods, if any.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.

Recoverable amount is determined in case of an individual asset: a) in the case of an individual asset, at the higher of the net selling price and the value in use; b) in the case of a cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of the cash

generating unit’s net selling price and the value in use.

Value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life.

2.10 Investments Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are

made, are classified as current investments. All other investments are classified as long-term investments.

Long term investments are carried at cost, after providing for any diminution in value, to recognise a decline “other than temporary” in nature. Current investments are carried at lower of cost and fair value. The determination of carrying amount of such investments is done on the basis of weighted average cost of each individual investment.

2.11 Inventories Inventories are valued after providing for obsolescence, as under:

a) Raw materials, components, stores, spares and loose tools at lower of weighted average cost or net realisable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.


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b) Manufacturing work-in-progress at lower of cost including related overheads or net realisable value.

c) Finished goods at lower of weighted average cost or net realisable value. Cost includes related overheads and excise duty paid/payable on such goods.

2.12 Foreign Currency transactions, Forward Contracts and derivatives a) The reporting currency of the Company is in Indian Rupees.

b) Foreign currency transactions are recorded on initial recognition in the reporting currency, using the exchange rate at the date of the transaction. At each Balance Sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary items, carried at historical cost denominated in a foreign currency, are reported using the exchange rate at the date of transaction.“Exchange differences that arise on settlement of monetary items or on reporting of monetary items at each Balance Sheet date at the closing rate are recognized as income or expenses in the period in which they arise.

c) Forward Contracts, other than those entered into to hedge foreign currency risk on expected firm commitments or highly probable forecast transactions, are treated as foreign currency transactions and accounted accordingly as per Accounting Standard (AS) 11 [The effects of changes in Foreign Exchange Rates]. Exchange differences arising on such contracts are recognized in the period in which they arise. “Gains and losses arising on account of roll over/cancellation of forward contracts are recognized as income / expenses of the period in which such roll over / cancellation takes place.

d) All the other derivative contracts, including forward contracts entered into, to hedge foreign currency risk on unexecuted firm commitments and highly probable forecast transactions, are recognized in the financial statements at fair value as on the Balance Sheet date, in pursuance of the announcement of the Institute of Chartered Accountants of India (ICAI) dated March 29, 2008 on accounting of derivatives. The Company has adopted Accounting Standard (AS) 30 [“Financial Instruments: Recognition and Measurement”] for accounting of such derivative contracts, not covered under Accounting Standard (AS) 11 [“The Effects of Changes in Foreign Exchange Rates”], as mandated by the ICAI in the aforesaid announcement.

Accordingly, the resultant gains or losses on fair valuation/settlement of the derivative contracts covered under Accounting Standard (AS) 30 *“Financial Instruments: Recognition and Measurement” are recognised in the Statement of Profit and Loss or Balance Sheet as the case may be after applying the test of hedge effectiveness. Where the hedge is effective, the gains or losses are recognised in the “Hedging Reserve” which forms part of “Reserves and Surplus” in the Balance Sheet, while the same is recognised in the Statement of Profit and Loss where the hedge is ineffective. The amount recognised in the “Hedging Reserve” is transferred to Statement of Profit and Loss in the period in which the underlying hedged item affects the Statement of Profit and Loss.

e) The premium paid/received on a foreign currency forward contract is accounted as expense/income over the period of the contract.

2.13 Borrowing Costs Borrowing costs that are attributable to the acquisition, construction or production, of a qualifying asset are capitalized as part of cost of

such asset till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

2.14 Taxes on Income Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions

of the Income Tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax credit and corresponding deferred tax assets are reognized to the extent there is reasonable certainty that sufficient future taxable Income will be available against which such deferred tax assets can be realized.

Deferred tax assets, when there is unabsorbed depreciation/business loss are recognized when it is virtually certain that sufficient future taxable Income will be available against which such deferred tax assets can be realized.

2.15 Provisions, contingent liabilities and contingent assets Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of a past event

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.


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NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012 Contingent liability is disclosed in case of:

a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.

b) a present obligation when no reliable estimate is possible

c) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent assets are neither recognized nor disclosed.

Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.

2.16 Earnings per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted

average number of equity shares outstanding during the period

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

2.17 Employee Stock Options Certain employees of the Company are eligible for stock options issued by Larsen & Toubro Limited (holding company) and the amounts

debited in this regard is charged to Statement of Profit and Loss.

As at 31.03.2013 As at 31.03.2012

No. of Shares R No. of Shares R

3. SHARE CAPITAL

Authorised

Equity shares of R 10 each 50,000,000 500,000,000 50,000,000 500,000,000

Issued, subscribed and fully paid up

Equity shares of R 10 each 50,000,000 500,000,000 50,000,000 500,000,000

a. Of the above, 25,500,000 (31.03.2012: 25,500,000) equity shares of R 10 each has been held by the holding company, Larsen & Toubro Limited.

b. Reconciliation of the Issued, subscribed and fully paid up shares outstanding at the beginning and at the end of the reporting period:

As at 31.03.2013 As at 31.03.2012

No. of Shares R No. of Shares R

Outstanding at the beginning of the period 50,000,000 500,000,000 30,000,000 300,000,000

Shares issued during the period – – 20,000,000 200,000,000

Outstanding at the end of the period 50,000,000 500,000,000 50,000,000 500,000,000

c. Shareholders holding more than 5% of equity shares as at the end of the year:

As at 31.03.2013 As at 31.03.2012

R % R %

Larsen and Toubro Limited, India 25,500,000 51% 25,500,000 51%

Kobe Steel Limited, Japan 24,500,000 49% 24,500,000 49%

50,000,000 100% 50,000,000 100%

d. Terms/rights attached to equity shares

The Company has only one class of equity share having par value of R 10 per share. Each holder of equity share is entitled to one vote per share. Each shareholder is entitled to dividend as proposed by the Board of Directors and approved by Shareholders.

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As at 31.03.2013 As at 31.03.2012R R R R

4. RESERVES & SURPLUS

Statement of Profit and Loss

As per last Balance Sheet (24,113,134) (4,121,980)

Add: Loss for the year (137,600,452) (19,991,154)

Closing balance (161,713,586) (24,113,134)

Hedging reserve

As per last Balance Sheet – –

Addition/(deduction) during the year, net 14,436,114 –

Closing balance 14,436,114 –

TOTAL (147,277,472) (24,113,134)

5. LONG-TERM BORROWINGS

Term loans from Bank (Secured)

Indian rupee loan from bank 240,000,000 130,000,000

Foreign currency loan from bank 99,093,863 122,656,480

339,093,863 252,656,480

Less: Current portion of long term borrowings [Note No.7B] 30,000,000 –

TOTAL 309,093,863 252,656,480

a. Indian rupee loan from bank carries interest @ bank base rate + 2.3% p.a. Interest on loan is payable on first of every month. The loan is repayable in 16 quarterly installments starting 09-10-2013.

b. Foreign currency loan from bank represents buyer credit facilities for acquisition of Plant and Machinery. These are denominated in USD, EUR and JPY and have different tenure ranging from 626 days to 707 days. Interest ranging LIBOR + 310 to 340 bps is payable every six months. The principal is repayable at the time of maturity starting 19-09-2014.

c. Terms loans from Banks are secured by: – deposit of title deeds and charge on all the Company’s immovable properties comprising of land admeasuring 11 acres and the

buildings and structures thereon, both present and future. – an exclusive charge by way of hypothecation of the Company’s other tangible fixed assets including plant and machinery, machinery

spares, tools and accessories, furniture, fixtures, vehicles and all other movable assets, both present and future.

As at 31.03.2013 As at 31.03.2012

No. of Shares No. of Shares

6. OTHER LONG TERM LIABILITIES

Forward contract payable, net 6,161,063 –

TOTAL 6,161,063 –

7A. SHORT-TERM BORROWINGS

Short term loans and advances from banks (Secured) 25,500,000 25,500,000

Export packing credit 18,763,650 –

TOTAL 18,763,650 –

Export packing credit carries interest @ applicable LIBOR + 2.5% p.a. Interest on loan is payable on first of every month till maturity. Short term loans and advances from banks are secured by hypothecation of inventories, book debts and receivables.


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As at 31.03.2013 As at 31.03.2012

No. of Shares No. of Shares

7B. CURRENT MATURITIES OF LONG TERM BORROWINGS

Term loans from Bank (Secured)

Indian rupee loan from bank [Note No.5] 30,000,000 –

TOTAL 30,000,000 –

7C. TRADE PAYABLES

Trade Payable (Current)

Micro and Small enterprises * – –

Others 40,441,133 44,164,670

TOTAL 40,441,133 44,164,670

* to the extent of information available with the Company.

7D OTHER CURRENT LIABILITIES

Interest accrued but not due on borrowings 3,336,723 2,025,313

Payable for Capital Goods 18,210,004 27,676,270

Advances from customers 50,048,047 –

Forward contract payable, net – 1,773,470

TDS payable 1,504,636 841,273

Other payables 10,208,659 1,652,631

TOTAL 83,308,068 33,968,957

As at 31-03-2013 As at 31-03-2012R R R R

7E SHORT-TERM PROVISIONS

Provision for employee benefits

Gratuity [Note 25] – 37,358

Compensated absences 903,020 641,000

Employee performance linked rewards – –

903,020 678,358

Other Provisions [Refer notes a. to c. below)

Provision for warranty 439,155 276,000

Provision for custom duty deposit 1,316,253 –

1,755,408 276,000

TOTAL 2,658,428 954,358

a. Provision for Warranty The Company gives warranty on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily

during the warranty period. The provision represents the expected cost of meeting such obligations of rectification / replacement. The timing of outflows is expected to be within a period of 12 months.

b. Provision for custom duty deposit This represents provision for differencial customs duty liability to the extent of deposit made pending assessment by special valuation

branch of customs for the imports made from related parties.

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c. Movement in provisions The table below gives the movement in warranty provisions:

WarrantyR

Custom Duty Deposit

R

Opening Balance 276,000 –

Additional provisions 240,698 1,316,253

Provisions used / reversed during the year (77,543) –

Closing Balance 439,155 1,316,253

8. TANGIBLE ASSETS

COST DEPRECIATION BOOK VALUE

Particulars As at01.04.2012

R

Additions

R

Deductions

R

As at31.03.2013

R

As at01.04.2012

R

For the year

R

Deductions

R

As at31.03.2013

R

As at31.03.2013

R

As at31.03.2012

R

Land 60,568,691 – – 60,568,691 – – – – 60,568,691 60,568,691

Buildings 155,386,123 66,022,019 – 221,408,142 3,060,155 6,058,354 – 9,118,509 212,289,633 152,325,968

Plant and Equipment 116,809,689 144,298,786 – 261,108,475 1,016,033 17,735,329 – 18,751,362 242,357,113 115,793,656

Electrical Installations – 29,937,181 – 29,937,181 – 795,915 – 795,915 29,141,266 –

Furniture and Fixtures 3,670,352 13,324,739 – 16,995,091 19,361 1,230,122 – 1,249,483 15,745,608 3,650,991

Office Equipment 6,426,655 5,903,588 – 12,330,243 234,171 1,941,972 – 2,176,143 10,154,100 6,192,484

Vehicles – 1,400,457 – 1,400,457 – 189,195 – 189,195 1,211,262 –

342,861,510 260,886,770 – 603,748,280 4,329,720 27,950,887 – 32,280,607 571,467,673 338,531,790

Previous Year 60,568,691 282,292,819 – 342,861,510 – 4,329,720 – 4,329,720

Add: Capital work-in-progress 2,468,322 110,284,386

573,935,995 448,816,176

a. The above tangible assets have been mortgaged in favour of HDFC Bank Limited, Chennai who have sanctioned term loans to the Company.

b. All the above tangible assets are owned by the Company.

9. INTANGIBLE ASSETS

COST DEPRECIATION BOOK VALUE

Particulars As at01.04.2012

R

Additions

R

Deductions

R

As at31.03.2013

R

As at01.04.2012

R

For the year

R

Deductions

R

As at31.03.2013

R

As at31.03.2013

R

As at31.03.2012

R

Technical Know-how 23,663,973 27,862,547 – 51,526,520 1,643,660 5,105,956 – 6,749,616 44,776,904 22,020,313

Computer Software 1,119,150 2,889,744 – 4,008,894 31,094 373,496 – 404,590 3,604,304 1,088,056

24,783,123 30,752,291 – 55,535,414 1,674,754 5,479,452 – 7,154,206 48,381,208 23,108,369

Previous Year – 24,783,123 – 24,783,123 – 1,674,754 – 1,674,754 23,108,369 –

As at 31.03.2013R

As at 31.03.2013R

10. LONG-TERM LOANS AND ADVANCES

Capital Advances

Unsecured, considered good 20,902,184 52,628,424

Security deposit

Unsecured, considered good 840,000 840,000

TOTAL 21,742,184 53,468,424

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Face Value per Unit As at 31-03-2013 As at 31.03.2013 As at 31.03.2013

R No. of Units R R

11 CURRENT INVESTMENTS

(valued at lower of cost or NAV)

Investment in Mutual Funds (Quoted)

L&T Liquid Fund Direct Plan- Growth 1,000 7,470.1860 12,000,000 –

L&T Cash fund Direct Plan- Growth 1,000 9,290.0615 14,713,046 –

26,713,046 –

Market Value of Quoted investments 26,823,936 –

As at 31.03.2013R

As at 31.03.2013R

12 INVENTORIES

(valued at lower of cost or net realizable value)

Raw Materials and Components * 21,945,098 1,349,993

Work in Progress 12,419,453 –

Loose Tools 3,555,608 3,172,142

TOTAL 37,920,159 4,522,135

* Includes in transit of R 65,814 (31.03.2012: R 665,931)

13 TRADE RECEIVABLES

Unsecured, considered good

Outstanding for a period exceeding six months from due date for payment – –

Others 66,768,428 89,513,030

TOTAL 66,768,428 89,513,030

As at 31.03.2013 As at 31.03.2012R R R R

14. CASH AND BANK BALANCES

Cash and cash equivalents

Balances with Banks on current account 14,378,824 8,621,439

Bank deposits with original maturity less than 3 months including interest accrued thereon

– 90,276,297

14,378,824 98,897,736

Other bank balances

Bank deposits with original maturity more than 3 months including interest accrued thereon *

10,177,480 75,131,463

TOTAL 24,556,304 174,029,199

* includes R Nil of bank deposits with original maturity more than 12 months (31.03.2012 : R 30,922,106)

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As at 31.03.2013R

As at 31.03.2013R

15A SHORT-TERM LOANS AND ADVANCES

Unsecured, considered good

Advance Recoverable in cash or kind 3,736,979 4,088,104

Balance with customs, excise authorities 23,280,720 8,909,853

Advance Income Tax & TDS [net of provision for tax of R 30,58,420 (31.03.2012: R 4,657,397)] 1,748,713 1,176,041

TOTAL 28,766,412 14,173,998

15B OTHER CURRENT ASSETS

Forward contract receivable, net 14,364,997 –

TOTAL 14,364,997 –

2012-13 2011-12R R R R

16. REVENUE FROM OPERATIONS

Sale of products

Mixers 74,694,712 125,218,847

Extruders 50,104,188 –

Parts for Mixer and Extruder 17,066,347 16,739,553

141,865,247 141,958,400

Other operating revenue

Income from subcontract activity 802,050 519,000

Installation & Commissioning Income 1,926,246 –

2,728,296 519,000

Revenue from Operations (Gross) 144,593,543 142,477,400

Less: Excise Duty 6,355,816 3,370,448

Revenue from Operations (Net) 138,237,727 139,106,952

2012-13 2011-12R R

17. OTHER INCOME

Interest Income on Bank deposits 5,479,180 13,046,759

Net gain on sale of current investments 6,466,929 2,258,006

Net gain/ (loss) on forward contracts (2,649,849) 4,540,919

Gain on foreign exchange (net) 15,274,434 5,291,731

Miscellaneous Income 45,832 435,080

TOTAL 24,616,526 25,572,495

18. COST OF RAW MATERIALS AND COMPONENTS CONSUMED

Inventory at the beginning of the year 1,349,993 –

Add: Purchases 155,701,680 90,299,133

Less: Inventory at the end of the year 21,945,098 1,349,993

TOTAL 135,106,575 88,949,140

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2012-13 2011-12R R

a. Class of goods

Rotor 15,324,588 13,174,075

Drilled Side 5,174,033 11,484,725

End Frame 4,538,900 7,103,550

Temperature control unit 2,303,500 –

Others 107,765,554 57,186,790

TOTAL 135,106,575 88,949,140

2012-13 2011-12

% to total Consumption

R % to total Consumption

R

b. Classification of goods

Imported 51 68,431,149 68 60,631,563

Indigenous 49 66,675,426 32 28,327,019

TOTAL 100 135,106,575 100 88,958,582

2012-13 2011-12R R

19. PURCHASE OF TRADING GOODS

Purchase of trading goods – 13,763,759

TOTAL – 13,763,759

2012-13 2011-12R R R R

20 CHANGES IN INVENTORIES OF FINISHED GOODS AND WORK-IN-PROGRESS

Closing Stock:

Work-in-progress 12,419,453 –

12,419,453 –

Opening Stock:

Work-in-progress – –

- –

Net Decrease / (Increase) (12,419,453) –

2012-13 2011-12R R

21 OTHER MANUFACTURING AND OPERATING EXPENSES

Stores, spares and consumables 5,975,808 3,371,819

Tools consumed 6,718,641 –

Power & fuel 8,237,845 1,744,199

Erection Charges 45,951 850,000

Other manufacturing and operating expenses 1,769,110 –

TOTAL 22,747,355 5,966,018

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2012-13 2011-12R R R R

22. EMPLOYEE BENEFITS EXPENSE

Salaries, wages and bonus 33,342,236 25,717,471

Contribution to and provision for:

Provident fund and other funds [Note 25] 1,533,243 1,243,935

Gratuity [Note 25] 278,502 430,444

Compensated absences \ Leave encashment 419,383 622,672

2,231,128 2,297,051

Expense on employee stock option scheme (refer Note 33)

147,609 223,381

Staff welfare expenses 4,252,159 3,021,524

TOTAL 39,973,132 31,259,427

2012-13 2011-12R R

23. SALES, ADMINISTRATION AND OTHER EXPENSES

Professional charges 3,620,669 2,882,124

Payment to auditor [Note 32] 241,450 184,343

Selling Commission 4,414,333 7,090,261

Rent 1,389,107 3,166,925

Rates and taxes 930,202 488,291

Travelling and conveyance 8,875,833 9,842,701

Repair and Maintenance - Building 225,067 24,540

Repair and Maintenance - Machinery 2,498,530 –

General repairs and maintenance 1,885,788 359,272

Telephone, postage and telegrams 1,029,210 431,510

Printing and stationery 198,220 191,454

Estate maintenance expenses 1,248,638 384,558

Advertisement and sales promotion expenses 294,135 –

Insurance 210,933 662,087

Freight outwards 1,072,351 –

Warranty expenses 240,719 276,000

Miscellaneous expenses 111,814 1,518,368

Bank Charges 620,830 –

TOTAL 29,107,829 27,502,434

24. FINANCE COSTS

Interest 31,494,218 2,690,546

Other borrowing costs and charges 6,912,373 2,975,745

Exchange difference to the extent considered as an adjustment to

borrowing costs 6,412,719 1,405,844

TOTAL 44,819,310 7,072,135


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NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 201225. DISCLOSURES REQUIRED BY ACCOUNTING STANDARD -15: EMPLOYEE BENEFITS a. Defined contribution plan Retirement benefit in the form of provident fund is a defined contribution scheme.The company contributes to the state owned provident

fund plan. The plan envisages contribution by employer and employee. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

The Company recognised charges of R 15,15,541 (2011-12: R 1,189,408) for provident fund contribution in the Statement of Profit and Loss.

b. Defined benefit plans Company plans to operate gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days salary

last drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vest after five years of continuous service. As at March 31, 2013, the fund is unapproved.

The Company has employees transferred from the other units of L&T group. Funds for the transferred employees for the period prior to April 1, 2011 will be transferred directly to the company’s trust when the scheme is aproved. Pending the transfer, the company has recognized liability only to the extent of accretion in liability between April 1, 2011 and March 31, 2013.

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

Amount Recognized in the Balance SheetAs at 31.03.2013

RAs at 31.03.2012

R

Present value of defined benefit obligation 951,029 430,444Fair value of plan assets 951,029 393,086

Net asset/(liability) reflected in Balance Sheet – (37,358)

Amount recognised in the Statement of Profit and Loss

2012-2013R

2011-2012R

Current Service Cost 333,551 331,198Interest Cost 253,977 –Expected return on plan assets (14,741) –Actuarial Losses/(Gains) (55,048) 2,843,522

Total 517,739 3,174,720Right of reimbursement from Larsen & Toubro Limited (Holding Company) – (2,744,276)

Amount recognized in the Statement of Profit and Loss 517,739 430,444

Amount included in “Employee benefits expense" 278,502 430,444Amount included as part of “Interest” 239,237 –

Changes in the present value of defined benefit obligation

As at 31.03.2013R

As at 31.03.2012R

Opening defined benefit obligation 3,174,720 –Current service cost 333,551 331,198Interest Cost 253,977 –Actuarial Losses/(Gains) (66,943) 2,843,522Total 3,695,305 3,174,720Right of reimbursement from Larsen & Toubro Limited (Holding Company) (2,744,276) (2,744,276)

Defined benefit obligation recognized in the Balance Sheet 951,029 430,444

Changes in the fair value of plan assetsOpening fair value of plan assets 393,086 –Expected return on plan assets * 14,741 –Contributions by employer 555,097 393,086Actuarial gains/(losses) (11,895) –

Closing fair value of plan assets 951,029 393,086

* Basis used to determine the overall expected return

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The trust formed by the Company manages the investments of gratuity fund in the insurer managed scheme. Expected return on plan assets is determined based on the assessment made at the beginning of the year on the return expected on its existing portfolio and expected yield on the respective assets in the portfolio during the year.The company expects to fund R 600,000 towards its gratuity plan during the year 2013-2014.

As at 31.03.2013R

As at 31.03.2012R

Major categories of plan assets as a percentage of total plan assets

Insurer managed funds 100% 100%

Changes in the fair value of plan assets

Expected return on plan assets 14,741 –

Actuarial gain/(loss) on plan assets (11,895) –

Actual Return on plan assets 2,846 –

Principal actuarial assumptions at the Balance Sheet date

Discount rate 8.00% 8.00%

Salary escalation rate 6.00% 6.00%

Attrition rate 3.00% 3.00%

Expected return on plan assets 8.00% 8.00%

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

26. DISCLOSURES AS REQUIRED BY ACCOUNTING STANDARD -17 : SEGMENT REPORTINGa. Business segments The company operates in a single business segment of designing, engineering, manufacturing and sale of rubber processing machinery and

spares.

b. Geographical segments Segmental Reporting is on the basis of geographical location of the customers and is as under:

2012-13 2011-12

R R R R

Revenue by location of the Customer

India 52,048,464 28,630,995

Rest of the World 86,189,263 110,485,399

Total 138,237,727 139,116,394

Carrying amount of Segment Assets by location of assets

India 843,148,733 807,631,331

Rest of the World – –

Total 843,148,733 807,631,331

Cost incurred on acquisition of tangible and intangible fixed assets and CWIP

India 183,822,997 410,694,054

Rest of the World – –

TOTAL 183,822,997 410,694,054


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27. DISCLOSURES AS REQUIRED BY ACCOUNTING STANDARD- 18: RELATED PARTY DISCLOSURESa. List of related parties

Name of the related Party RelationshipLarsen & Toubro Limited, India Holding CompanyKobe Steel, Ltd., Japan Joint Venture PartnerL&T General Insurance Company Limited, India Fellow SubsidiaryL&T Plastics Machinery Limited, India Fellow SubsidiaryEWAC Alloys Limited, India Fellow SubsidiaryMr. S. Srinivasan, India Key Management Personnel (Manager)Mr. S. Srinivasan, India Key Management Personnel

2012-13R

2011-12R

b. Subscription to Equity Shares received – 20,000,000Larsen & Toubro Limited, India – 10,200,000Kobe Steel, Ltd., Japan – 9,800,000Purchase of Goods & Services 67,051,992 69,159,087Larsen & Toubro Limited, India 5,768,614 2,919,684L&T Plastics Machinery Limited@ – 608,000Kobe Steel, Ltd., Japan 61,283,378 65,631,403Purchase of tangible and fixed assets / CWIP 1,049,296 11,120,427Larsen & Toubro Limited, India 1,049,296 6,786,070EWAC Alloys Limited – 3,108,097Kobe Steel, Ltd., Japan – 1,226,259Sale of Goods and Services 56,271,952 519,000Larsen & Toubro Limited, India 700,050 519,000Kobe Steel, Ltd., Japan 55,571,902 –Rent paid – 757,800Larsen & Toubro Limited, India – 757,800Selling commission 4,414,333 7,090,261Larsen & Toubro Limited, India 3,841,147 1,112,000Kobe Steel, Ltd., Japan 573,186 5,978,261Royalty/ Technical know-how fees 38,046,629 –Kobe Steel, Ltd., Japan 38,046,629 –Charges paid / (received) for deputation of employees – 435,080Larsen & Toubro Limited, India – 435,080Insurance charges 184,701 3,638L&T General Insurance Company Limited 184,701 3,638Managerial Remuneration 3,219,795 3,244,516S. Srinivasan (Manager) 3,219,795 3,244,516@ upto 27.09.2012, date on which it ceased to be fellow subsidiary.

c. Amount due to / from related partiesTrade PayablesLarsen & Toubro Limited, India 6,665,952 –Kobe Steel, Ltd., Japan 1,543,756 13,433,470Capital AdvancesKobe Steel, Ltd., Japan 19,974,420 7,888,007Other Current liabilitiesLarsen & Toubro Limited, India 328,195 4,276,209EWAC Alloys Limited – 2,108,098Trade ReceivablesLarsen & Toubro Limited, India 48,200 –Kobe Steel, Ltd., Japan 261,290 –Advances from customersKobe Steel, Ltd., Japan 31,547,845 –

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2012-13 2011-12

28. DISCLOSURES AS REQUIRED BY ACCOUNTING STANDARD - 20: EARNINGS PER SHARE(Loss) after taxes as per Statement of Profit and Loss (R) (137,600,452) (19,991,154)Weighted Average equity shares outstanding (Nos.) 50,000,000 40,218,579Earnings Per Share (Basic and Diluted) (R) (2.75) (0.50)Nominal value of equity share (R) 10 10

2012-13 2011-12R R R R

29. DISCLOSURES REQUIRED BY ACCOUNTING STANDARD - 22 : ACCOUNTING FOR TAXES ON INCOME

The major components of deferred tax assets and liabilities are as under:Deferred tax liabilitiesDifference between book and tax depreciation 26,597,015 4,795,403

Total 26,597,015 4,795,403Deferred tax assetsUnabsorbed carry forward losses and depreciation 59,367,096 11,112,049Hedging reserve 4,460,759 –Provisions 364,317 410,697other timing differences 671,702 671,702

Total 64,863,874 12,194,448

Deferred tax Assets (net) 38,266,859 7,399,044

Deferred tax asset has not been recognized in in the absence of virtual certainty of its realization.

30. COMMITMENTS Estimated amount of contracts remaining to be executed on capital account (net of advances) R 26,613,047 (2011-12: R 200,844,884).

The company has availed duty exemption aggregating R 40,507,602 for import of certain capital goods and raw materials under EPCG scheme. The company has export obligation aggregating to R 243,045,612 to be fulfilled within six years (2016-17). The company has issued bank guarantee aggregating R 40,961,100 in favour of the commissioner of customs in relation to the above. (2011-12: R 42,485,800)

31. DERIVATIVE INSTRUMENTS In line with the Company’s risk management policy, the various financial risks mainly relating to changes in the exchange rates are hedged

by using a combination of forward contracts besides the natural hedges.

As at 31.03.2013 As at 31.03.2012R R

a. Particulars of derivative contracts entered into for hedging purposes outstanding as at Balance Sheet dateForward contracts for receivables @ 60,967,760 –Forward contracts for payables @ 30,384,368 –Forward contracts for foreign currency loan 99,093,865 –

@ including firm commitments and highly probable forecasted transactions.b. Unhedged foreign currency exposures

Receivables 7,028,875 –Cash and bank balances – 7,694,333Payables 4,502,633 16,938,319Foreign currency loan including interest accrued thereon 874,175 90,837,992

2012-13 2011-12R R

32. AUDITORS’ REMUNERATION (EXCLUDING SERVICE TAX) AND EXPENSES CHARGED TO ACCOUNTSAs Auditor: Audit fees 60,000 25,000 Tax audit fees 50,000 20,000In other capacity: Taxation matters 30,000 20,000 Company law matters 10,000 10,000 Other services (certification fees) 91,450 101,000

TOTAL 241,450 176,000


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33. EMPLOYEE STOCK OPTIONS SCHEMEa. Employee stock options Pursuant to the Employees Stock Options Scheme established by the holding company (i.e. Larsen & Toubro Limited), stock options were

granted to the employees of the Company. Total cost incurred by the holding company, in respect of the same is R 481,926. The same is being recovered over the period of vesting by the holding company. Accordingly, cost of R 416,928 (2011-12: R 223,381) has been recovered by the holding company upto current year, out of which, R 193,547 (2011-12: R 223,381) was recovered during the year. Balance R 64,998 will be recovered in future periods.

2012-13R

b. Computation of total costCost recovered in past 223,381Cost recovered during the year 193,547Cost to be recovered in future 64,998

Total cost incurred by the holding company in respect of ESOP-Sub's employees 481,926

Cost recovered up to the current year 416,928

c. Table for future cost2013-14 54,9362014-15 10,0622015-16 –2016-17 –2017-18 –

64,998

2012-13 2011-12R R

34. VALUE OF IMPORTS (ON C.I.F. BASIS)Raw materials, components and traded goods 68,873,773 74,516,094Capital goods 32,244,460 115,440,669

TOTAL 101,118,234 189,956,763

35. EXPENDITURE IN FOREIGN CURRENCYTechnical know-how fees 38,046,629 –Selling commission 573,186 –Interest 4,113,154 1,062,957Other matters 2,090,531 3,803,176

TOTAL 44,823,499 4,866,133

36. EARNINGS IN FOREIGN EXCHANGEExport of goods (FOB basis) 84,263,017 110,485,399Installation and commissioning income 1,926,246 –

TOTAL 86,189,263 110,485,399

37. GENERALFigures for the previous year have been regrouped/reclassified wherever necessary.









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DIRECTORS’ REPORT - lnt.in · S-513 L&T KOBELCO MACHINERY PRIVATE LIMITED DIRECTORS’ REPORT...

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