notes to the financial statements for the year ended 31st march 2015 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES A) Basis of brparation of financial statements These financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. GAAP includes mandatory accounting standards as brscribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, and the provisions of the Act (to the extent notified). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The financial statements are brsented in Indian Rupees except per share data and where mentioned otherwise. In the opinion of the management, all the adjustments which are necessary for a fair brsentation have been included. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Act. The Company has identified its operating cycle as 12 months. B) Use of Estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") in India requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and the reported amount of revenue and expenses during the reported period. Management believes that the estimates made in the brparation of the financial statements are prudent and reasonable. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods. C) Current and non-current classification All assets and liabilities are classified into current and non-current. Assets An asset is classified as current when it satisfies any of the following criteria: a) it is expected to be realised in, or is intended for sale or consumption in, the company's normal operating cycle; b) it is held primarily for the purpose of being traded; c) it is expected to be realised within 12 months after the reporting date; or d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include the current portion of non-current financial assets. All other assets are classified as non-current. Liabilities A liability is classified as current when it satisfies any of the following criteria: a) it is expected to be settled in the company's normal operating cycle; b) it is held primarily for the purpose of being traded; c) it is due to be settled within 12 months after the reporting date; or d) the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. Operating cycle Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. D) Fixed Assets Tangible Assets Tangible fixed assets are stated at cost of acquisition (except in cases of revalued asset which is stated at revalued amount) less accumulated debrciation and impairment losses if any. The cost of acquisition includes subsequent improvement thereto inclusive of taxes, duties (net of cenvat), freight and other incidental expenses relating to acquisition, improvement and installation. Intangible Assets Intangible assets include software and are stated at their cost of acquisition less accumulated amortization and impairment losses if any. An intangible asset is recognized, where it is probable that the future economic benefit attributable to the assets will flow to the Company and where its cost can be reliably measured. Capital Work in Progress The cost incurred for fixed assets, the construction/installation of which is not completed, are included under "capital work-in-progress" and the same are classified and added to the respective assets on the completion. E) Debrciation and amortization Debrciation on all the tangible assets is provided for on straight line method based on the useful lives of assets as brscribed under part C of Schedule II of the Act. Intangible assets (Software) are amortized over their respective useful lives on a straight line basis, commencing from the date the assets is available to the Company for its use. Debrciation in respect of addition to fixed assets is provided on pro-rata basis from the date from which such assets are ready for intended use. Debrciation on fixed assets sold, discarded or demolished during the year is provided at their respective rates up to the date on which such assets are sold, discarded or demolished. F) Impairment In accordance with AS 28 'Impairment of Assets' the carrying amounts of the Company's assets are reviewed at each Balance Sheet date to determine whether there is any impairment. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. Impairment loss is recognized in the Statement of Profit and Loss or against revaluation surplus, where applicable. G) Investments Non-current (long term) investments are valued and stated at cost. Provision for diminution in the value of investments is made only when, in the opinion of management, there is decline, other than temporary, in the carrying value of such investments. Current investments are valued at cost or market value whichever is lower. H) Inventories a) Inventories are valued at lower of cost and net realizable value. b) Cost of inventories is assigned by using the FIFO formula. c) Goods in transit, if any are stated at actual cost incurred upto the date of the balance sheet. I) Revenue Recognition Sales are inclusive of excise duty and charges received from the customers except the export sales, which is accounted without the excise duty. In conformity with the requirements of Accounting Standard 9 "Recognition of Revenue" the sales are brsented in the financial statements as Sales less Excise Duty. Interest income is recognized using the time proportion method, based on underlying interest rates. Dividend income is recognized when right to receive the dividend is established. J) Employee Benefits Short-term employee benefits Employee benefits payable wholly within twelve months of rendering the services are classified as short-term employee benefits. These benefits include salaries and wages, bonus, ex-gratia, leave, etc. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the year. Post-employment benefits Defined contribution plans The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company's contribution is recognized as an expense in the Statement of Profit and Loss during the year in which the employee renders the related service. Defined benefit plans Gratuity The Company's gratuity benefit scheme is a defined benefit plan. The Company's obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current period and prior periods; that benefit is discounted to determine its brsent value. The brsent value of the obligation under such defined benefit plan 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 brsent value of the estimated future cash flows. The discount rates used for determining the brsent value of the obligation under defined benefit plan are based on the market yields on Government securities as at the Balance Sheet date. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss. K) Borrowing Costs The Company capitalises interest and other costs incurred by it in connection with funds borrowed for the acquisition of fixed assets. Where specific borrowings are identified to a fixed asset or a new unit, the Company uses the interest rates applicable to that specific borrowing as the capitalisation rate. Capitalisation of borrowing costs ceases when all the activities necessary to brpare the fixed assets for their intended use are substantially complete. Other borrowing costs are charged to statement of profit and loss. L) Segment Reporting Segments are identified in accordance with the Accounting Standard 17 "Segment Reporting" taking into account the organizational structure as well as differing risks and returns. The business segment is disclosed as primary segment. M) Foreign Currency Transactions a) All the transactions including transactions of acquiring fixed assets, in foreign currency are recorded by applying the exchange rates at the date of the transactions. b) Monetary items denominated in foreign currency remaining unsettled at the end of the year, are reported using the closing rates. The exchange difference arising as a result of the above is recognised in the statement profit and loss. c) In case the monetary items are covered by the foreign exchange contracts, the difference between the year end rate and the exchange rate at the date of the inception of the forward exchange contract is recognised as exchange difference. d) In respect of hedging transactions, the brmium/discount rebrsented by difference between the exchange rate at the date of the inception of the forward exchange contract and forward rate specified in the contract is amortised as expense or income over the life of the contract. N) Taxation Income tax expense comprises Current Tax and Deferred Tax charge or credit. Provision for current tax is made on the assessable income at the rate applicable to the relevant assessment year. The deferred Tax Assets and Deferred Tax Liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of unabsorbed debrciation and deferment of allowances under tax laws, are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. Deferred Tax assets on account of other timing differences are recognized, only to the extent there is a reasonable certainty of its realization. At each balance sheet date the carrying amount of deferred tax assets are reviewed to reassure realization. O) Earning per share The basic earnings per equity share are computed by dividing the net profit or loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share, and also the weighted average number of equity shares, which may be issued on the conversion of all dilutive potential shares, unless the results would be anti dilutive. P) Leases Lease rentals payable under operating leases are recognized in the statement of profit and loss on a straight line basis over the term of the lease. Q) Customs & Excise Duties The custom duty payable, on imported materials lying at the custom bonded warehouses at the end of the year and excise duty payable, in respect of goods manufactured but not cleared from the factory brmises at the end of the year, are neither included in expenses nor included in the valuation of the inventories of such materials / goods. Such duties are accounted for on actual payment on clearance of such materials/goods. This practice has no impact on the profits of the Company. R) Cenvat Credit Cenvat credit available on raw materials and packing materials, as per the provisions of Cenvat Credit Rules, has been accounted for by reducing the cost of respective material accounts. Cenvat credit available on capital goods, as per the provisions of Cenvat Credit Rules, has been accounted for by reducing the cost of such capital goods. Cenvat credit available on the input services as per the provisions of Cenvat Credit Rules has been accounted for by reducing the cost of such input services. S) Export Incentive The benefits, on account of entitlement to import duty free raw material under the Advance License Scheme in respect of goods already exported, are not valued and brought into the books in the year of export. The raw materials are recorded at cost at which they are procured in the year of import. The benefits under FMS/FPS/Incremental Export Incentivisation Scheme and Duty Drawback Scheme are recognized when the exports are made. T) Provisions and Contingencies The Company creates a provision when there is brsent obligation as a result of a past event that probably requires an outflow of resources embodying economic benefits and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is so longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognized in the period in which the change occurs. NOTE 2: SEGMENT REPORTING The segment reporting as required under Accounting Standard 17 "Segment Reporting" is not applicable to the company as the company's operations are brdominantly comprises of only one business segment - Instrument cooling fans/ motors. NOTE 3: LEASES The company has taken various residential brmises / industrial galas under operating lease or on leave and license basis. These are generally not non-cancellable and for a period ranging between 11 months and above and are renewable at mutual consent on mutually agreeable terms. The company has given refundable interest free security deposits in accordance with the agreed terms. The rent paid in accordance with these agreements is debited to the statement of profit and loss for the year. NOTE 4: TAXATION MATTERS: a) The sales tax assessments of the company have been completed upto financial year 2006-2007 for its Daman unit and upto financial year 2011-12 for its Kandivali unit. b) The income tax assessments of the company have been completed upto assessment Year 2012-2013. NOTE 5: ISSUE OF SHARE WARRANTS, THEIR CONVERSION AND UTILIZATION OF ITS PROCEEDS (a) (i) The Compnay, during the year, has alloted 3478800 Warrants at a price of Rs. 13.40 per warrant carrying an entitlement to subsribe to an equivalent number of equity shares of face value of Rs. 10/- each within 18 months from the date of allotment of warrants to promoter/promoter group and non promoter group in accordance of Regulations for Preferential Issue contained in Chapter VII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended, on 23rd September 2014 and received 25% of issue price as warrant allotment money aggregating to Rs. 1,16,53,980. The compnay has utilized this proceeds for its working capital requirements and other corporate purposes in accordance with the object of the issue. (ii) Out of the above warrants, the Company has alloted 1098300 equity shares on covesrion of 1098300 warrants on 13th December 2014 and realized the balance 75% allotment money aggregating to Rs. 11037915. The Company has utilized this proceed for its working capital requirements and other corporate purposes in accordance with the objects of the said Issue. (b) The Compnay, further during the year, has alloted 1200000 Warrants at a price of Rs. 24.50 per warrant carrying an entitlement to subsribe to an equivalent number of equity shares of face value of v 10/- each within 18 months from the date of allotment of warrants to promoter/promoter group in accordance of Regulations for Preferential Issue contained in Chapter VII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended, on 23rd December 2014 and received 25% of issue price as warrant allotment money aggregating to Rs. 73,50,000. The compnay has utilized this proceeds for its working capital requirements and other corporate purposes in accordance with the object of the issue. NOTE 41: The Company is in process of appointing professional directors to compose the Nomination and Remuneration Committee in conformity with the provisions of the Section 178 of the Companies Act, 2013. NOTE 42: (i) As per the consistent practice followed by the company in earlier years, the excise duty payable in respect of goods manufactured during the year but not cleared from factory brmises at the end of year, are neither included in expenses nor considered in valuation of the inventories of such goods which is contrary to the guidance note "Accounting Treatment for Excise Duty" issued by the Institute of Chartered Accountant Of India . However the same does not have any impact on the profit of the year. (ii) As per the consistent practice followed by the company in earlier years, the custom duty payable in respect of imported materials lying at custom bonded warehouse at the end of year, are neither included in expenses nor considered in valuation of the inventories of such materials. However this practice does not have any impact on the profit of the year. As per our attached report of even date For R. S. Agrawal & Associates Chartered Accountants (Firm Registration No. 100156W) R. S. Agrawal Partner Membership No. 033216 For and on behalf of the Board of Directors Kishore Chand Talwar Chairman & Managing Director DIN 00351751 Ayyaswami Sundaram Director DIN 02997721 Debabrata Guha Chaudhury Company Secretary Nainy K. Tanna Wholetime Director DIN 00351762 Kundan Talwar Chief Financial Officer Place : Mumbai Dated : May 26, 2015 |