Bajaj Auto

1 In the previous year, under a scheme of arrangement under Section 391
 to 394 of the Companies Act, 1956 the “Manufacturing Undertaking” of
 erstwhile Bajaj Auto Ltd. vested with the company from 1st April 2007
 on a going concern basis, together with all assets, liabilities and
 investments pertaining to the undertaking. On the scheme becoming
 effective, the name of the company was changed to Bajaj Auto Limited.
 
 2 (A) Contingent liabilities not provided for in respect of :
 
                                                As at           As at
                                        31 March 2009   31 March 2008
                                       Rs. In Million  Rs. In Million
 
 (i)   Sales Bills Discounted                      -                -
 (ii)  Claims against the company not 
       acknowledged as debts                 4,166.5          5,014.1
 (iii) Guarantees given by the company 
       to banks, on behalf of its
       subsidiary, PT Bajaj Auto 
       Indonesia                               263.7                -
 (iv)  Guarantees given by the company 
       to Housing Development Finance 
       Corporation Ltd. - for loans to 
       Employees                                 6.6             10.1
 (v)   Excise and Customs demand - 
       matters under dispute and
       Claims for refund of Excise 
       Duty, if any, against Excise            775.8            792.8
 (vi)  Income-Tax matters under dispute -
       Appeal by company                           -                -
       Appeal by Department                        -                -
                                                   -                -
 (vii) Sales Tax matters under dispute       2,602.0            425.9
 (viii) Claims made by temporary workmen
        Pending before various courts in 
        respect of similar matters 
        adjudicated by the Supreme Court 
        in the past.The matter is 
        contingent on the facts and 
        evidence presented before the
        courts / adjudicating authorities 
        and not necessarily likely Liability
        Liability to be influenced by the 
        Supreme Courts order unascertained
        unascertained
 
 (B) The company has imported Capital Goods under the Export Promotion
 Capital Goods Scheme, of the Government of India, at concessional rates
 of duty on an undertaking to fulfill quantified exports, which have
 been entirely fulfilled by the close of the year. However, formal
 discharge from obligation by discharge of license by the appropriate
 authorities is in progress.
 
 (C) The Sales tax benefit availed by the company by virtue of
 assignment of incentives attached to the wind farm business, has been
 passed-on to the Bajaj Finserv Ltd. The obligation to repay could
 devolve on the company if not settled by Bajaj Finserv Ltd. Total
 amount passed on to date aggregates Rs. 3,107.6 million (Previous year
 Rs. 3,107.6 million).
 
 3) Significant Accounting Policies followed by the company are as
 stated in the Statement annexed to this schedule.
 
 4) Changes in Accounting Policies
 
 a) Voluntary Retirement:
 
 The company had announced a Voluntary Retirement Scheme (VRS) on 19
 July 2008 for the workmen of its Akurdi plant. The scheme was open till
 25 July 2008. In response to the VRS, 2331 workmen opted for the same.
 Upto previous year, expenditure incurred on voluntary early separation
 was entirely expensed to Profit and Loss Account in the year of
 retirement. The company has this year decided to recognise such
 expenditure aggregating to Rs. 3,666 million over a period of two years
 in line with the option of the special transitional provision
 introduced in the Accounting Standard - 15 “Employee Benefits” allowing
 such expenditure to be deferred for recognition over the payback period
 but not extending beyond 1st April 2010. Accordingly, the company has
 recognised a charge for the year of Rs. 1,833 million and the balance
 Rs. 1,833 million will be recognised as an expense in the subsequent
 year.
 
 b) Instruments acquired to hedge highly probable forecast transaction:
 
 In order to recognise the impact of fluctuation in foreign currency
 rates arising out of instruments acquired to hedge highly probable
 forecast transaction, in appropriate accounting periods, the company
 has from this year decided to apply the principles of recognition set
 out in the Accounting Standard 30 - Financial Instruments-Recognition
 and Measurement (AS-30) as suggested by the Institute of Chartered
 Accountants of India.
 
 Accordingly, the unrealised loss (net) consequent to foreign currency
 fluctuations, in respect of effective hedging instruments, represented
 by simple forward covers, to hedge future exports, were carried as a
 Hedging Reserve, during the year, and to be ultimately set off in the
 profit and loss account when the underlying transaction arises, as
 against the past practice of recognising the losses, in respect of such
 derivatives, in the profit and loss account at the end of each period
 determined with reference to the foreign exchange rates at the close of
 the period. However, the amount outstanding in the hedge reserve at the
 close of the year is Rs. Nil.
 
 The company has also, during the year, entered into range forward
 contracts to hedge highly probable forecast transactions, where the
 export realisations of the company are protected below a minimum
 pre-determined foreign exchange rate whereas the realisation advantages
 are available to the company there from up to a higher pre-determined
 foreign exchange rate. Though these instruments meet the management’s
 Foreign exchange risk management objectives, they do not meet the test
 of effectiveness as per the principles of hedge accounting. Hence
 valuation losses aggregating Rs. 218 million, have been recognised in
 the profit and loss account.
 
 5) Transfer of some of the titles to the assets vested with the
 company consequent to the Scheme of arrangement (de-merger) could not,
 where necessary, be transferred, as at 31st March 2009 pending
 adjudication of stamp duty. Hence the same were held in trust for the
 company by Bajaj Holdings and Investment Ltd.
 
 6) Investments:
 
 a.  Fixed Income Securities transferred to and vested with the company,
 consequent to the demerger of erstwhile bajaj auto ltd. were as per the
 scheme of arrangement (de-merger) recognised at their fair market
 values, where the carrying cost on 1st April 2007 was higher. The
 resulting diminution (net of deferred tax aggregating Rs. 323.7
 million) amounting to Rs. 903.6 million, as per the said scheme, was
 provided for by a debit to the General Reserve.
 
 b.  Investments made by the company other than those with a maturity of
 and those intended to be held for less than one year, being of
 long-term nature, diminution in the value of quoted Investments are not
 considered to be of a permanent nature. On an assessment of
 non-performing investments (quoted and unquoted) as per guidelines
 adopted by the company during the period ended 31st March 2009, the
 management has determined further provisions for possible diminution /
 losses aggregating Rs. 25.0 million during the year.
 
 c.  PT. Bajaj Auto Indonesia (PT. BAI), a subsidiary of the company, in
 which the company holds 97.5%, has registered accumulated losses which
 exceed its paid-up capital. The company thru PT. BAI made a foray into
 the Indonesian market, which is very competitive but promising.
 Considering the challenges in setting up an appropriate dealer and
 service network, creation of brand awareness, appropriate tie ups with
 finance agencies, understanding customer behavior and preferences, in
 addition to setting up an assembly plant, the gestation period is
 expected to be long but eventually profitable. Hence diminution in the
 value of the investments made in PT. BAI are not considered to be of a
 permanent nature and hence no provisions are required to be made in
 this regard, as per the policy followed by the company, at this point
 of time.
 
 7) Deposits include a sum of Rs. 80 million (Previous year Rs. 80
 million) against use of premises on a Leave License basis, placed with
 Directors and their relatives, jointly and severally.
 
 8) Future minimum lease rental in respect of assets
 
 (i) given on operating lease in the form of office premises after April
 1, 2001 Minimum future lease payments as on March 31, 2009:
 
 (a) Receivable within one year - Rs. 0.1 million (Rs. 2.3 million)
 
 (b) Receivable between one year and five years - Rs. Nil (Rs. 6.8
 million)
 
 (c) Receivable after five years - Rs. Nil (Rs. Nil)
 
 (ii) taken on operating lease in the form of office premises after
 April 1, 2001 Minimum future lease payments as on March 31, 2009:
 
 (a) Payable within one year- Rs. 58.6 million (Rs. 30.1 million)
 
 (b) Payable between one year and five years- Rs. 123.3 million (Rs.
 48.5 million)
 
 (c) Payable after five years - Rs. 189.4 million (Rs. 113.9 million)
 
 9) Disclosure of transactions with Related Parties, as required by
 Accounting Standard 18 ‘Related Party Disclosures’ has been set out in
 a separate statement annexed to this Schedule. Related parties as
 defined under clause 3 of the Accounting Standard have been identified
 based on representations made by key managerial personnel and
 information available with the company.
 
 10) Segment Information based on the Consolidated Financial Statements
 attached to the Independent Financial Statements has been disclosed in
 the Statement annexed to this Schedule.
 
 11) Considering the company has been extended credit period of 45 days
 by its vendors and payments being released on a timely basis, there is
 no liability towards interest on delayed payments under “The Micro,
 Small and Medium Enterprises Development Act 2006” during the year.
 There is also no amount of outstanding interest in this regard, brought
 forward from previous years. The above information is on basis of
 intimation received, on requests made by the company, with regards to
 vendors registration under the said Act.
 
 12) Amounts less than Rs. 50,000 have been shown at actual against
 respective line items statutorily required to be disclosed.
 
 13) Previous year figures have been regrouped, wherever necessary, to
 make them comparable with those of the current year.