Note 1: Corporate Information Amara Raja Batteries Limited ("the Company") is one of the largest manufacturer of lead-acid storage batteries for industrial and automotive applications in India. The equity shares of the Company are listed on the BSE Limited and the National Stock Exchange of India Limited. The Company's products are supplied to various user segments viz., Telecom, Railways, Power Control, Solar and UPS under Industrial Battery business; and to Automobile OEMs, Replacement Market and Private Label Customers under Automotive Battery business. The Company's products are exported to various countries in the Indian Ocean Rim. The Company also provides installation, commissioning and maintenance services. The leading automotive and industrial battery brands of the Company are Amaron®, PowerZoneTM, Power Stack®, AmaronVolt™ and Quanta®. Note 2: Significant Accounting Policies a. Basis of Accounting and Preparation of Financial Statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards brscribed under Section 133 of the Companies Act, 2013 ('the Act') as applicable, and the relevant provisions of the Companies Act, 2013/ Companies Act, 1956, as applicable. The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. b. Use of Estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/ materialize. c. Inventories Inventories are valued at the lower of cost and the net realizable value after providing for obsolescence and other losses, where considered necessary. The method of determination of cost of various categories of inventories is as follows: (i) Raw materials and bought-out components, stores and spares and loose tools - Weighted average cost. Cost includes purchase cost and other attributable expenses. (ii) Finished Goods and Work-in-progress - Weighted average cost of production which comprises direct material cost, direct wages and appropriate overheads based on normal level of activity. Excise duty is included in the value of finished goods. (iii) Stock-in-trade - Weighted average cost d. Cash and cash equivalents (for purposes of Cash Flow Statement) Cash comprises cash on hand, cash at bank, cheques on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. e. Tangible fixed assets Tangible fixed assets are stated at cost less accumulated debrciation/ amortization and impairment losses, if any. Cost comprises the purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalized and debrciated over the useful life of the spare or the principal item of the relevant assets, whichever is lower. Fixed assets acquired and put to use for project purpose are capitalized and debrciation thereon is included in the project cost till the project is ready for its intended use. Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realizable value and are disclosed separately. Capital work-in-progress are fixed assets which are not yet ready for their intended use and are carried at cost, comprising direct cost and related incidental expenses. f. Intangible assets Intangible assets are carried at cost, net of accumulated amortization and impairment losses, if any. Cost of an intangible asset comprises of purchase price and attributable expenditure on making the asset ready for its intended use. g. Debrciation and Amortisation Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following category of assets, in which case the life of the assets has been assessed based on technical advice taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, maintenance support, etc.: The useful lives of the assets are periodically reviewed and re-determined and the unamortised debrciable amount is charged over the remaining useful life of such assets. Assets costing Rs. 5,000 and below are fully debrciated in the year of acquisition. Assets taken on lease (leasehold land and leasehold improvements) are amortised over the period of lease. Intangible assets, comprising computer software, are amortised on the straight-line method over a period of 5 years. i. Impairment of Assets The Company assesses at each Balance Sheet date whether there is an indication that an asset/ cash generating unit may be impaired. If any indication exists the Company estimates the recoverable amount of such assets and if carrying amount exceeds the recoverable amount, impairment is recognised. The recoverable amount of an asset/ cash generating unit is the greater of the net selling price and its value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using an appropriate discount factor. When there is indication that brviously recognised impairment loss no longer exists or may have decreased such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was brviously charged to the Statement of Profit and Loss. . Investments Investments, which are readily realizable and are 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 individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. . Foreign currency transactions and translations Transactions made during the year in foreign currency are recorded at the exchange rate brvailing at the time of transactions. Monetary assets and liabilities relating to foreign currency transactions remaining unsettled at the year-end are translated at the exchange rate brvalent at the date of Balance Sheet. Exchange differences arising on actual payment/ realization and year end reinstatement referred to above are recognised in the Statement of Profit and Loss. In respect of forward contracts entered into to hedge risks associated with foreign currency fluctuation on its existing assets and liabilities, the brmium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the period of the contract. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised in the Statement of Profit and Loss. k. Employee benefits (i) Defined contribution plans The Company's contributions to Provident Fund (Government administered), Employees' State Insurance Scheme and Superannuation Fund (under a scheme of Life Insurance Corporation of India), considered as defined contribution plans are charged as an expense in the Statement of Profit and Loss based on the amount of contribution required to be made and when services are rendered by the employees. (ii) Defined benefit plans For defined benefit plans in the form of gratuity fund administered under a scheme of the Life Insurance Corporation of India, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. (iii) Other long-term employee benefits Other long-term employee benefits comprise of leave encashment which is provided for based on the actuarial valuation carried out as at the end of the year. (iv) Short-term employee benefits The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include compensated absences which are expected to occur within twelve months after the end of the period in which employee renders the related service. . Revenue Recognition and Other Income Revenue Recognition: (i) Sale of goods are recognised, net of returns and trade discounts, on transfer of significant risk and rewards of ownership to the buyer. Sales include excise duty but exclude sales tax and value added tax. (ii) Sale of services is recognised based on the agreements with the customers and when services are rendered. Other Income: (i) Interest income is recognised on a time proportionate method, based on the transactional interest rates. (ii) Royalty income is recognised on accrual basis in accordance with the terms of the agreement. (iii) Dividend income is accounted for in the year when the right to receive payment is established. m. Research and Development Expenses Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product's technical feasibility has been established, in which case such expenditure is capitalized. The amount capitalized comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. Fixed assets utilized for research and development are capitalized and debrciated in accordance with the policies stated for fixed assets. n. Leases Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss as per the applicable lease terms Earnings per share Basic earnings per share is computed by dividing profit after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period brsented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits/ reverse share splits and bonus shares, as appropriate. p. Taxes on Income (i) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961. (ii) Deferred tax is recognised on timing differences, being the differences between taxable income and the accounting income that originate in one period and capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed debrciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there are unabsorbed debrciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets are reviewed at each Balance Sheet date for their realisability. q. Provisions, Contingent Liabilities and Contingent assets A provision is recognised when the Company has a brsent obligation as a result of past events and it is probable than an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their brsent value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognised in the financial statements. r. Provision for warranty The Company estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions. The cost of warranty is net of realisable scrap value and includes the applicable taxes and duties like excise duty and also the best estimate of relevant freight expenses. The timing of outflows will vary based on the actual warranty claims. 2.1 Segment reporting I. Business Segment The Company has considered business segment as the primary segment for disclosure. The Company is engaged in the manufacture and trading of lead acid storage batteries, which in the context of Accounting Standard 17 "Segment Reporting" is considered the only business segment. II. Geographical segment The Company sells its product mainly within India where the conditions brvailing are uniform. Since the sales outside India are below threshold limit, no separate geographical segment disclosure is considered necessary 2.3 Corporate Social Responsibility Expenses incurred on Corporate Social Responsibility (CSR) programs under section 135 of the Companies Act, 2013 act are charged to Statement of Profit and Loss under "Other expenses" [Note 24] aggregating Rs. 119.80 million (For the year ended March 31, 2015: Rs. 96.25 million) 2.4 Previous year figures have been recast / reclassified wherever necessary to correspond with the current year's classification / disclosures. For and on behalf of the Board of Directors Dr. Ramachandra N Galla Chairman Jayadev Galla Vice Chairman and Managing Director S.V. Raghavendra Chief Financial Officer M. R. Rajaram Company Secretary Place: Hanover, Germany Date: May 24, 2016 |