1.Corporate Information MRO-TEK Limited was incorporated in the year 1984. The Company has two divisions. The Access and Networking division is engaged in the activity of manufacture and supply, as well as distribution, of Access and Networking equipment & Solutions. The solar division is engaged in the manufacture and supply of Solar based power systems. The Equity shares of the Company are listed in Bombay Stock Exchange of India, Mumbai and National Stock Exchange of India Limited, Mumbai. 1. Additional Notes to Accounts I. STATEMENT OF ACCOUNTING POLICIES 1. Basis of brparation of financial statements: The financial statements are brpared under the historical cost convention in accordance with Indian Generally Accepted Accounting Principles (GAAP), and all income and expenditure having a material bearing on the financial statements are recognized on accrual basis. The financial statements comply with the applicable mandatory Accounting Standards brscribed by the Companies (Accounting Standards) Rules 2006, and the relevant provisions of the Companies Act, 1956. The Accounting policies adopted during the current year, in the brparation of these financial statements, are consistent with that of the brvious year. 2. Use of Estimates: In brparation of financial statements conforming to GAAP requirements, certain 'estimates and assumptions' are essentially required to be made, with respect to items such as, provision for doubtful debts, future obligations under employee retirement benefit plans, income taxes, classification of Inventory and the useful life period of Fixed Assets. Due care and diligence have been exercised by the Management in arriving at such 'estimates and assumptions' since, they may directly affect, the reported amounts of income and expenses during the period, as well as the balances of Assets and Liabilities, including those which are contingent in nature, as at the date of reporting of the financial statements. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements. 3. Revenue Recognition: a. Sales Revenues are recognized when goods are invoiced and dispatched to customers, and are recorded inclusive of Excise Duty, but are net of Sales Returns, Trade Discounts and Sales Tax. b. Sales Revenue includes grants and subsidies received/receivable from Government, in respect of sale of goods related to SBEPs, and is a part of Revenue from Operations. c. The revenues from Annual Maintenance Contracts are recognized on pro-rata basis over the period in which such services are rendered. d. Commission income is recognized on completion of supplies by the principals against the relevant orders. e. The revenues from Service and Installation Charges are recognized on completion of respective works contract/s. f. Income from Investments is recognized when right to receive payment is established. g. Rental & Hire-charges Income is recognized on accrual basis, quantified under the relevant arrangements. h. Interest is recognized using the Time -Proportion method, based on the rates implicit in the transaction. 4. Employee Stock Option Plan: The Company has Employee Stock Option Plan for the benefit of its employees, terms of which are enunciated in "MRO-TEK Employee Stock Option Scheme 2005", duly approved by the shareholders of the Company. All options granted under this scheme are accounted in accordance with the Guidance Note on Accounting for Employee Share Based Payment Plans issued by the Institute of Chartered Accountants of India (ICAI). 'Fair Market Value' is assessed as provided under the Statute, and the difference between such 'Fair Market Value' and 'exercise price', if any, is expensed as "Employee Compensation" over the period of vesting. 5. Foreign Currency Translation: Foreign currency transactions are recorded at the rate of exchange brvailing on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. All monetary items denominated in foreign currency are converted at the rates brvailing on the date of the financial statement. 6. Fixed Assets: Tangible and intangible fixed assets are stated at cost of acquisition (net of CENVAT, wherever applicable), less accumulated debrciation. Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing the assets to their working condition for intended use. Direct costs are capitalized till the assets are ready to be put to use. Interest on borrowings, wherever applicable, attributable to new projects is capitalized and included in the cost of fixed assets as appropriate. 7. Debrciation and amortization: Debrciation in respect of Fixed Assets, is provided adopting Straight Line Method over the useful life of the Asset as estimated by the Management. Debrciation for assets purchased/sold during the period is proportionately charged. Individual low cost assets (acquired for less than Rs.5,000/-) are entirely debrciated in the year of acquisition. The useful life of all the assets estimated by the managements are as below: 8. Inventories: The cost of inventories comprise all cost of purchase, costs of conversion and other costs incurred in bringing the inventories to their brsent location and condition. a) Raw Materials, Finished (Traded) Goods & Goods in Transit are valued at lower of cost and net realizable value, on First-In First- Out basis. b) Semi-Finished Goods & Finished (manufactured) Goods, are valued at lower of cost (Including an appropriate portion of overheads up to the respective stage/s of completion) and, net realizable value, on First-In First - Out basis. 9. Employee Benefits: a. Short Term Employee Benefits: Benefits payable to employees within 12 months of rendering services such as wages, salaries, bonus, paid annual leave, etc are classified as Short Term Employee Benefits and are recognized in the period in which the employee renders related services. b. Long Term/ Post Employment/ Termination Benefits: Retirement benefits are provided for on accrual basis in the following manner: i Gratuity: Gratuity is a defined benefit scheme and is accrued based on Actuarial Valuations at the balance sheet date, carried out by an independent actuary. The Company has an employee gratuity fund managed by Life Insurance Corporation of India (LIC). Actuarial gains or losses are charged to Profit and Loss Account. The company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard AS(15), "Employee Benefits". ii Liability in respect of Leave Encashment is provided for, on actuarial Valuations. iii Provident Fund: On the basis of payments/contributions made to the concerned Provident Fund authorities. 10. Research & Development: Revenue expenditure on Research & Development is recognized as an expense in the year in which it is incurred. Capital expenditure incurred on Research and Development is debrciated adopting Straight Line Method, at rates as detailed in para (7) above. Revenue and Capital expenses on Research & Development are identified and accounted separately in the books. 11. Investments: Investments are classified as current investments and long-term investments. Long-term investments are stated at cost (except where there is a diminution in value other than temporary, in which case, the carrying value is reduced to recognize the decline). Current investments are stated at lower of cost or fair market value. 12. Cash and Cash Equivalents 'Cash' comprises of cash on hand and demand deposits with Bank. 'Cash Equivalents' are short term, highly liquid investment, that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 13. Expenditure: Expenses are accounted on the accrual basis and provisions are made for all known losses and liabilities. 14. Taxation: Deferred tax is recognized, subject to the consideration of prudence, in respect of deferred tax assets or liabilities, on timing differences, being the difference between taxable income and accounting income that originate in one period, and is reversible in one or more subsequent periods. Deferred tax assets are recognized only to the extent there is reasonable certainty that the asset can be realized in the future; however where there is unabsorbed debrciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets and are reviewed for the appropriateness of their respective carrying values at each reporting date. Income Taxes are accrued in the same period the related revenue and expenses arise. A provision is made for income tax annually, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the company will pay normal tax in future and the resultant asset can be measured reliably. 15. Segment Accounting Policies: (a) Segment Assets and Liabilities: All assets and liabilities are directly attributable to the respective segments. Segment assets include all operating assets used by the respective segments and consist, principally, of fixed assets, inventories, sundry debtors, loans and advances and operating cash and bank balances. Segment assets and liabilities do not include investments, inter-corporate deposits, share capital, reserves and surplus, borrowings, provision for contingencies and income tax (both current and deferred). (b) Segment Revenue and expenses: Revenue and expense, excepting interest income on deposits, profit on sale of investments, interest expense, provision for contingencies and income-tax, are directly attributable to the respective segments. 16. Impairment of assets: At the end of each year, the Company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard-28 "Impairment of Assets" brscribed by the Companies (Accounting Standards) Rules 2006, where the recoverable amount of any fixed asset is lower than its carrying amount, a provision for impairment loss on fixed assets is made for the difference. 17. Leases: Leases where the Lessor effectively retains substantially all the risk and benefits of ownership of the leased term are classified as operating lease. Operating lease payments are recognized as an expense in the Profit and loss account on a straight line basis over the lease term. 18. Borrowing Costs: Borrowing costs attributable to the acquisition, Construction or production of qualifying assets are capitalized as a part of the cost of such Assets up-to the date when such assets are ready for intended use. Other borrowing costs are charged as an expense in the year in which they are incurred. 19. Provisions, Contingent Liabilities and Contingent Assets. A provision is recognized when the Company has a brsent obligation as a result of past events; 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. Contingent liability is disclosed in case of a brsent obligation arising from past events when it is not probable that an outflow of resources will be required to settle the obligation, or a brsent obligation when no reliable estimate is possible, or a possible obligation arising from past events where the probability of outflow of resources is remote. Contingent Assets are neither recognized nor disclosed. 20. Events occurring after the date of Balance Sheet: Material events occurring after date of Balance Sheet are taken into cognizance. 21. Cash Flow Statement: Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating; financing and investing activities of the company are segregated. 22. Earnings Per Share: The Company reports basic and diluted earnings per share in accordance with the Accounting Standards -20 - 'Earnings per Share' brscribed by the Companies (Accounting Standards) Rules 2006. Basic earning per share is computed by dividing the net Profit or Loss for the year by the weighted average number of Equity Shares outstanding during the year. Diluted earning per share is computed by dividing the net profit or loss for the year by the weighted average number of Equity Shares outstanding during the year as adjusted for the effects of all dilutive potential Equity Shares. II. ADDITIONAL NOTES (Forming an integral part of Accounts) 1. Deferred Tax: During the year, the Company has accounted for Rs.8,29,143 (Rs.6,24,200 Deferred Tax Asset) towards Deferred Tax Asset and has considered the same as reverse charge to the statement of Profit & Loss as stipulated under Accounting Standard- 22, on "Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India. However, on conservative basis, deferred tax asset on carry forward business losses, has not been considered. 2. Inventories: Finished Goods includes Rs.7,02,112 (Rs.31,98,885), being value of material at prospective customers' brmises for demonstration purposes. 3. Disclosure under Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 : Dues in respect, Micro and Small enterprises who have duly registered themselves under the relevant Act, and furnished the statutorily required proof thereof, are being regularly met as per agreed terms and, as such, there remains no liability towards interest. Principal amount/s remaining payable in respect of such parties, as at 31 March 2014, amount to Rs.47,42,516 (Rs.16,61,366) 4. Revenues from Sale of Solar Based Equipment and projects during the year was Rs. 24,87,17,338 (Rs.15,05,95,994). This includes a sum of Rs. 2,42,23,243 (Rs.2,02,19,122) being the Central Financial assistance receivable from the Ministry of Non Renewable Energy (MNRE) on supply of such equipment and projects. 5. Certain balances rebrsenting debtors and creditors, are subject to reconciliation & receipt of confirmations from parties, pursuant to confirmation requests sent by the company. Sundry Debtors includes a sum of Rs. 2,96,18,165 (Rs.2,02,19,122) being the Central Financial Assistance receivable from the Ministry of Non Renewable Energy (MNRE) on the supply of Solar based Equipments and Projects. 6. 'Upkeep & Maintenance expenses' reflected in Note - 24 includes Repairs to Building - Rs.53,19,188 (Rs.53,86,091) and Repairs to Machinery - Rs.7,90,078 (Rs.9,37,550). 7. With respect to Access & Networking products, no provision has been made for post-sales support expenses, as the company is of the opinion that such expenses are not material, based on past experience. With regard to the newly introduced products related to Solar Based Equipments & Projects, the Company has back-to-back arrangements towards warranty support with the original suppliers', hence the Company is of the opinion that no additional provision is required to be made in the book of accounts for post-sale support expenses. 8. Inventories includes a sum of Rs.1,38,43,660 (Rs.2,76,96,729) being slow moving stock beyond 1 year not provided for. 9. Provision has been made for an estimated amount of Rs 265 lakhs (Rs.500 lakhs) in respect of certain items of non moving/slow-moving inventory, based on Generally Accepted Accounting Practices, even though these items continue to be usable in the activities of the company. 10. Auditors' remuneration 11. Figures for the year have been rounded-off to the nearest rupee and, those in the brackets, wherever given, correspond to respective figures for the brvious year. 12.Figures of brvious year have been regrouped & reclassified, wherever necessary. for and on behalf of the Board of Directors S. Narayanan Chairman & Managing Director H. Nandi Managing Director A. Mohan Rao Director N. K. Rajasekharan Director Srivatsa VP-Finance for Narayanan, Patil & Ramesh Chartered Accountants L. R. Narayanan Partner Membership No: 200/25588 Firm No. 002395S Place : Bangalore Date : 29 May 2014 |