Notes forming part of the Financial Statements Note 1 A. Background The Company was formed in the year 1940 as National Ekco Radio & Engineering Co Ltd (JV between E K Cole & Fazalbhoy). The Company became "Nelco Limited" in 1969. In 1969, the Company was br-dominantly the manufacturer of audio-visual appliances like Television, calculator, Servo Voltage Stabilizers and such other office equipment. In late 90's the Company entered in Automation business (SCADA, Traction & Drives), which was divested in 2010. In 1995 the Company through its subsidiary, Tatanet Services Limited (TNSL) first installed VSAT captive hub for Tata Group Companies connectivity and in 2003 it entered into the public domain in VSAT services. Nelco is today focused in providing systems and solutions in the areas of VSAT connectivity. It also provides solutions in the area of Integrated Security & Surveillance. The Company offers a range of innovative and customized solutions for businesses and government institutions under one roof. B. Significant Accounting Policies 1.1 Basis of Accounting and brparation of financial statements The financial statements of the Company have been brpared under the historical cost convention, on an accrual basis, in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"), as applicable. The accounting policies adopted in the brparation of financial statements are consistent with those followed in the brvious year. In order to be in compliance with the Companies Act, 2013, the Company has extended its financial year end of its financial statements from 30th September, 2015 to 31st March, 2016. Consequently, the financial statements of the Company are for 18 months from 1st October, 2014 to 31st March, 2016. Accordingly, the corresponding figures for twelve months ended 30th September, 2014 are not comparable. 1.2 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 period. 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 / materialise. 1.3 Cash and cash equivalents (for purposes of Cash Flow Statement) Cash comprises cash 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. 1.4 Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 1.5 Fixed Assets and Debrciation Fixed Assets (Tangible / Intangible) Fixed assets are carried at cost less accumulated debrciation / amortization and impairment losses, if any. The cost of fixed assets comprises its 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, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Capital work-in-progress: Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. Debrciation and amortization Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. 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. Leasehold land is amortized over the duration of the lease. 1.6 Intangible Assets Intangible assets are initially measured at cost and amortized over their estimated useful life on straight line method as follows: Software Expenditure incurred is amortized over a period of five years from the date of acquisition. Technical knowhow is amortized over a period of five years from the date of acquisition. The estimated useful life of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization period is revised to reflect the changed pattern, if any. 1.7 Inventory Valuation a) Inventories comprise all costs of purchases, conversion and other costs incurred in bringing the inventories to their brsent location and condition. b) Raw materials are valued at the lower of cost or net realizable value. Cost is determined on the basis of the moving weighted average method. c) Finished goods produced and purchased for sale, semi finished products and spares are carried at cost or net realizable value, whichever is lower. 1.8 Investments Investments, being long term, are stated at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of investments. 1.9 Revenue Recognition 1.9.1 Sale of product is recognized when risk and rewards of ownership of the product are passed on to the customers on the basis of terms of contract, which is generally on the dispatch of goods. 1.9.2 Sales from services are recognized when services are performed. 1.9.3 Income on Investment i) Interest income is accounted on accrual basis. ii) Dividend income is accounted when right to receive payment is established. 1.10 Accounting for Contracts Contract revenue are accounted on "Percentage of Completion" basis measured by the proportion that the cost incurred up to the reporting date bears to the estimated total cost of the contract. 1.11 Foreign Currency Transactions Transactions in foreign currencies are recorded at the exchange rates brvailing on date of transaction. Monetary items are translated at the year-end rates. The exchange difference between the rate brvailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the period is recognized as income or expense, as the case may be. Any brmium or discount arising at the inception of a forward exchange contract is recognized as income or expense over the life of contract. 1.12 Provision for Warranty In respect of warranties given by the company on sale of certain products, the estimated costs of these warranties are accrued at the time of sale. The estimates for accounting of warranties are reviewed and revisions are made as required. 1.13 Employee Benefits Defined Contribution Plan (a) Company's contributions paid/payable during the period towards Provident Fund, Superannuation Fund and ESIC are recognized in the Statement of Profit and Loss. (b) Company's Contribution towards Provident Fund is based on a percentage of salary which is made to a trust administered by the company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the company. Defined Benefit Plan Company's liability towards gratuity and long term compensated absences are determined by independent actuaries, using projected unit credit method. Past services are recognized on a straight line basis over the average period until the benefits become vested. Actuarial gains and losses are recognized immediately in the Statement of Profit and loss as income or expense. Obligation is measured at the brsent value of estimated future cash flows using discounted rate that is determined by reference to the market yields at the balance sheet date on Government Bonds where currency and terms of Government Bonds are consistent with the currency and estimated terms of the benefit obligation. 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 recognized during the period when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service. Long-term employee benefits: Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognized as a liability at the brsent value of the defined benefit obligation as at the Balance Sheet date. 1.14 Segment reporting The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market/fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities." 1.15 Lease Rentals The company's significant leasing arrangements are in respect of operating leases for brmises (office, stores, godowns, etc.), plant, machinery and equipments taken on lease. The leasing arrangements, which are not non-cancellable, range between eleven months and five years generally, and are usually renewable by mutual consent on agreed terms. The aggregate lease rentals payable are charged as rent. 1.16 Earnings per share Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit / (loss) 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. 1.17 Taxes on Income Current Tax is determined as the amount of tax payable in respect of taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. Deferred Tax is recognized, subject to consideration of prudence, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent period(s). Deferred tax assets arising on account of unabsorbed debrciation or carry forward of tax losses are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realized. 1.18 Provisions and contingencies A provision is recognised when the Company has a brsent obligation as a result of past events and it is probable that 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. 2. In the year 2006, the Company had filed arbitration proceedings against Jawaharlal Nehru Port Trust (JNPT) for enforcement of its claim in respect of the additional work carried out, wrongful deduction of liquidated damages and encashment of bank guarantee by JNPT. The Arbitration award was passed in favour of the Company on 6th February, 2012. The said award, however, was challenged by JNPT in the Hon'ble Bombay High Court which dismissed the plea on 6th February, 2014 and awarded the claim to the Company. JNPT paid Rs. 1,240.90 Lakhs as decretal dues in June 2014 quarter. 3. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current period's classification / disclosure. Signature to Notes forming part of financial statements " 1" to "45" For and on behalf of the Board of Directors R.R. Bhinge Chairman P. J. Nath Executive Director & CEO Uday Banerjee Chief Financial Officer Girish V. Kirkinde Company Secretary Place: Mumbai Date : 4th May, 2016 |