Summary of the significant accounting policies and other explanatory information for the year ended 31 March 2015 Company overview

VRL Logistics Limited (the "Company") is in logistics services dealing mainly in domestic transportation of goods. Other businesses include bus operations, air chartering service, sale of power and sale of certified emission reductions (CER) units generated from operation of wind mills. The operations of the Company are sbrad all over the country through various branches.

1: Significant Accounting Policies

a) Basis for Preparation of Financial Statements

The financial statements, which have been brpared under the historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 2013 (the 'Act') (to the extent notified) and comply in all material aspects with the Accounting Standards as brscribed under Section 133 of the Act read with the Rule 7 of the Companies (Accounts) Rules, 2014. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year

b) Use of Estimates

The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities on the date of financial statements and reported amounts of revenue and expenses for that year. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

All assets and liabilities have been classified as current and non-current as per normal operating cycle of the Company and other criteria set out in Schedule III to the Companies Act, 2013. Based on nature of products / services, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

c) Fixed Assets and Capital Work in progress

i. Fixed Assets are stated at cost of acquisition or construction less accumulated debrciation/amortisation. Cost includes inward freight, taxes and expenses incidental to acquisition and installation, up to the point the asset is ready for its intended use.

ii. Direct expenses as well as clearly identifiable indirect expenses, incurred during the period of construction of building and body building of vehicles are capitalised with the respective assets in accordance with the ratio determined and certified by Company's Management.

iii. Assets acquired but not ready for use and stock of body building materials are classified under Capital work in progress and are stated at cost comprising direct cost and related incidental expenses.

d) Debrciation

i. Debrciation on fixed assets is provided under the straight line method over the useful lives of assets as brscribed under Part C of Schedule II of the Companies Act, 2013 except on Vehicles and Wind Turbine Generators (part of Plant and equipments).

Vehicles and Wind Turbine Generators are debrciated over a period of nine years and nineteen years respectively, based on internal assessment and independent technical evaluation carried out by external valuer; the management believes that the useful life as mentioned rebrsents the period over which management expects to use these assets. Hence, the useful life for these assets are different from the useful life as brscribed under Part C of Schedule II of the Companies Act, 2013.

ii. Cost of leasehold land and leasehold improvements is amortised over the period of the lease or its useful life, whichever is lower.

iii. Goodwill is amortized over a period of five years.

iv. Software is amortized over a period of five years.

v. Debrciation on replaced vehicle bodies is restricted to the period that is co-terminus with balance working life of such vehicles.

e) Leases

Operating Leases are those leases where the lessor retains substantial risks and benefits of ownership of leased assets. Rentals in such cases are expensed with reference to lease terms and other considerations on a straight line basis.

f) Impairment of Assets

Management evaluates at regular intervals, using external and internal sources, the need for impairment of any asset. Impairment occurs where the carrying value of the asset exceeds the brsent value of future cash flows expected to arise from the continuing use of the asset and its net realisable value on eventual disposal. Any loss on account of impairment is expensed as the excess of the carrying amount over the higher of the asset's net sales price or brsent value, as determined.

After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life.

A brviously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation, if there was no impairment.

g) Foreign Currency Transactions

i. Transactions denominated in foreign currencies are recorded at the exchange rate brvailing at the date of the transaction.

ii. Monetary assets and liabilities denominated in foreign currencies at the year end are restated at the rate of exchange brvailing on the date of the Balance Sheet.

iii. Any exchange difference on account of settlement of foreign currency transactions and restatement of monetary assets and liabilities denominated in foreign currency is recognised in the Statement of Profit and Loss.

h) Investments

Investments are classified into current investments and non-current investments. Current investments, i.e. investments that are readily realisable and intended to be held for not more than a year are valued at lower of cost and net realisable value. Any reduction in the carrying amount or any reversal of such reductions are charged or credited to the Statement of Profit and Loss.

Non-current investments are stated at cost. Provision for diminution in the value of these investments is made only if such decline is other than temporary, in the opinion of the Management.

i) Valuation of Inventories

Consumables and stores and spares are valued at lower of cost computed on first-in-first out basis or net realisable value. Stock of tyres is valued based on specific identification method. Obsolete, defective, unserviceable and slow/ non moving stocks are duly provided for.

j) Recognition of Income and Expenditure

i. Income and Expenditure is recognised on accrual basis and provision is made for all known losses and liabilities.

ii. Revenue from Goods transport and Courier service is recognised when goods / documents are delivered to the customers/nearest destination branches.

iii. Revenue from Bus operation is recognised upon commencement of journey of passengers.

iv. Revenue from sale of power is recognised upon deposit of units of generated power at the grid of the purchasing electricity company.

v. Revenue from sale of eligible carbon credit units such as Verified / Certified Emission Reductions units (VERs)/ (CERs) is recognised on completion of the validation process for units generated and entering of a definitive binding agreement for the sale of such units.

vi. Revenue from passenger air charter is recognised upon commencement of flight journey.

vii. Revenue from hotel operations is recognized upon rendering of service.

viii. Freight income related to unclaimed parcels is recognised on realisation basis.

ix. Interest on deposits is recognised on time proportion basis.

x. Dividend income is recognised when the right to receive the dividend is established.

xi. Rent income is recognised on time proportion basis.

xii. Advertisement income is recognised when the related advertisement or commercial appears before the public.

xiii. Provision for expenses against trip advance is made on an estimated basis.

k) Employee Benefits

i. All short term employee benefits are accounted on undiscounted basis during the accounting period based on services rendered by employees.

ii. The Company's contribution to Provident Fund and Employees State Insurance Scheme is determined based on a fixed percentage of the eligible employees' salary and charged to the Statement of Profit and Loss. The Company has categorised its Provident Fund and the Employees State Insurance Scheme as a defined contribution plan since it has no further obligations beyond these contributions.

iii. The Company's liability towards gratuity and compensated absences, being defined benefit plans are accounted for on the basis of an independent actuarial valuation and actuarial gains/losses are charged to the Statement of Profit and Loss. Gratuity liability is funded by payments to the trust established for the purpose.

l) Borrowing Costs

Borrowing costs attributable to the acquisition and construction of qualifying assets are capitalised as part of the cost of such assets up to the date such assets are ready for their intended use. Other borrowing costs are treated as revenue expenditure.

m) Taxation

i. Tax expenses comprise current tax (amount of tax for the period determined in accordance with the Income Tax Regulations in India) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period).

ii. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed debrciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to reflect the amount that is reasonably / virtually certain, as the case may be, to be realised.

iii. Tax credit is recognised in respect of Minimum Alternate Tax (MAT) as per the provisions of Section 115JAA of the Income Tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and is reviewed at each Balance Sheet date.

n) Provisions and Contingent Liabilities

Provisions are recognised in the financial statements in respect of brsent probable obligations, for amounts which can be reliably estimated.Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. Such liabilities are disclosed by way of notes to the financial statements. No disclosure is made if the possibility of an outflow on this account is remote.

2 The Department of Stamps and Registration, Government of Karnataka had issued a notice towards stamp duty payable on acknowledgment of delivery of a letter, article, document, parcel, package or consignment, given by the Company to the sender of such letter, article, document, etc. in accord­ance with the Karnataka Stamp Act, 1957 (Article- 1 (ii) of the Schedule). The Company has challenged the constitutional validity of the said provision by way of Writ Petition before the Honourable High Court of Karnataka, Circuit Bench at Dharwad. The Writ Petition came-up for hearing and subject to deposit of a sum of Rs.25 lacs, the authorities have been directed not to take any coercive action and also to deter­mine the Stamp Duty liability. The Company has paid the de­posit of Rs 25 lacs but the quantum of Stamp Duty payable is yet to be arrived at by the department. In the opinion of the management, no financial liability is expected to arise in this regard. The financial liability that may ultimately devolve upon the Company is currently not ascertainable and as such no amount has been included as contingent liability towards the same.

3 The Company has issued a notice dated 5 November 2014 to Mr. Rudrapratap Tripathi, proprietor of M/s Indian Corpora­tion, alleging that he has entered into a sale deed with the Company in relation to property situated at Bhiwandi, with­out being duly authorized to do so by the original land own­ers. The Company has further alleged that Mr. Rudrapratap Tripathi has not disclosed the defects in the title to the prop­erty including the fact that the land is an agricultural land. The Company has paid a sale consideration of Rs.3,240 lacs towards purchase of the property. In the aforesaid notice, the Company has also alleged cheating and breach of trust by Mr. Rudrapratap Tripathi and has called upon him to re­fund Rs.3,240 lacs paid to him along with the stamp duty, registration and other expenses incurred together with interest at the rate of 22% p.a. from the date of payment till the payment receive date, failing which the Company has the rights to initiate criminal proceedings against him. Man­agement has received necessary rebrsentations from the attorney of Mr. Rudrapratap Tripathi in relation to sanctity of title and permitted utility of the aforesaid land towards in­dustrial use and occupation. The attorney has also indicated the intention of Mr. Rudrapratap Tripathi to re-purchase the aforesaid property, if required, at the sale consideration paid by the Company. Management does not expect any financial impairment of the book value of the aforesaid property con­sidering the rebrsentations received from Mr. Rudrapratap Tripathi through his attorney and accordingly no adjustments have been made to the financial statements to this effect

4 During the year ended 31 March 2015, the Company had sold land at Bangalore, having book value of Rs.3,128.37 lacs for value aggregating Rs.3,500 lacs. The profit on sale of the aforesaid land amounting to Rs.371.63 lacs has been accounted as exceptional item in the Statement of Profit and Loss for the year ended 31 March 2015.

During the year ended 31 March 2014, the Company had sold land at Gurgaon, Haryana having book value of Rs.1,155.28 lacs for value aggregating Rs.1,860 lacs. An amount of Rs.41 lacs was incurred towards the sale process including conver­sion of land into Non Agricultural Land. The profit on sale of the aforesaid land amounting to Rs.663.72 lacs has been accounted as exceptional item in the Statement of Profit and Loss for the year ended 31 March 2014.

5 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) - Nil (Previous year: Rs.59.16 lacs).

6  The land whereat 34 Wind Turbine Generators (WTGs) are installed (at Kappatgudda, Gadag District, Karnataka) is leased to Suzlon Energy Limited by Karnataka Forest Depart­ment. Consequently, Suzlon Energy Limited has transferred the lease in favour of the Company with requisite clearances from Karnataka Forest Department.

7  CERTIFIED EMISSION REDUCTIONS CREDITS

The Company earns income by trading complete amount of possible Green House Gas (GHG) emission reductions gen­erated by its Windmill project. The Company's Clean Devel­opment Mechanism (CDM) project is registered with the United Nations Framework Convention on Climate Change (UNFCCC) and necessary approvals for the trade of carbon credits has been procured.

The Company has entered into an agreement dated 29 Oc­tober 2009 with Asian Development Bank (ADB) (as trustee of the Asia Pacific Carbon Fund) amended vide 'Amendment and Restatement Agreement' dated 01 August 2011, for sale of Certified Emission Reductions (CERs), generated during the period March 2009 to December 2012 (delivery period). The Company had generated and delivered the relevant units of CERs in accordance with the aforesaid agreements in earlier years and recognised revenue accordingly.

However, as per the 'Sale and Purchase of surplus CER's' clause in the aforesaid agreement, whenever the Company generates surplus CER's i.e. CER's in excess of the contract CER's on or before 31 December 2012, which has been lat­er verified and certified, ADB shall have the right but not the obligation, to purchase the said surplus CER's from the Company. Correspondingly, ADB had procured 61,366 CERs during an earlier year, in accordance with the contract. The balance 11,563 (net of 2% CDM administration fees) CERs, which has been certified but not purchased by ADB along with 69,342 (net of 2% CDM administration fees) CERs certi­fied for the period January 2013 to January 2014, remains unrecognised in the books of account, the impact of which, as per the management, is not expected to be material to the financial statements.

Further, the certification of CERs generated during the pe­riod February 2014 to March 2015 is underway and hence is not quantifiable.

8 SUBSEQUENT EVENT

The Company completed its Initial Public Offering (IPO) pursuant to which 22,823,333 equity shares of the Company of Rs. 10 each were allotted at a price of Rs. 205 per equity share consisting of fresh issue of 5,707,333 equity shares and an offer for sale of 17,116,000 equity shares by the selling shareholders. The equity shares of the Company were listed on The National Stock Exchange of India Limited and Bombay Stock Exchange Limited on 30 April 2015.

9 brVIOUS YEAR FIGURES

The brvious year's figures have been recast / regrouped / rearranged wherever considered necessary.

For Walker Chandiok & Co LLP

(Formerly Walker, Chandiok & Co)

Chartered Accountants

Khushroo B. Panthaky

Partner

For H. K. Veerbhaddrappa & Co

Chartered Accountants

Arrvvind Kubsad

Partner

For and on behalf of the Board of Directors

Vijay Sankeshwar Chairman and Managing Director

(DIN: 00217714)

Anand Sankeshwar Managing Director

(DIN: 00217773)

Sunil Nalavadi Chief Financial Officer

Aniruddha Phadnavis General Manager (Finance) and Company Secretary

Place : Hubballi Date : 25 May 2015