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Bajaj Auto

BSE: 532977|NSE: BAJAJ-AUTO|ISIN: INE917I01010|SECTOR: Auto - 2 & 3 Wheelers
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« Mar 15
Notes to Accounts Year End : Mar '16
a.  Of the above
 
 i.  144,683,510 equity shares were allotted as fully paid bonus shares
 by capitalisation of General reserve by the Company on 13 September
 2010.
 
 ii.  1,805,071 equity shares thereof (excluding 1,805,071 equity shares
 allotted as bonus shares thereon) are deemed to be issued by way of
 Euro Equity Issue represented by Global Depository Receipts (GDR)
 evidencing Global Depository Shares outstanding on the record date.
 Outstanding GDRs at the close of the year were 52,844 (60,044)
 
 b.  Terms/rights attached to equity shares
 
 The Company has only one class of equity shares having a par value of
 Rs. 10 per share. Each holder of equity shares is entitled to one vote
 per share. The interim dividend declared by the Board of Directors and
 the dividend proposed by the Board of Directors and approved by the
 shareholders in the annual general meeting is paid in Indian rupees. In
 the event of liquidation of the Company, the holders of equity shares
 will be entitled to receive remaining assets of the Company, after
 distribution of all preferential amounts. The distribution will be in
 proportion to the number of equity shares held by the shareholders.
 
 1. Derivative hedging instruments
 
 The Company has adopted the accounting treatment and disclosures in
 accordance with the principles laid down in Accounting Standard 30 and
 Accounting Standard 32 on foreign currency derivative contracts.
 
 The Company holds foreign currency derivative to hedge its foreign
 currency exposure. Derivatives are initially recognised at fair value
 on the date a derivative contract is entered into and are subsequently
 re-measured at their fair value. The Company designates foreign
 currency derivatives as hedges of foreign currency risk associated with
 a highly probable forecast transaction (cash flow hedge).
 
 The Company has entered into simple forward contracts and par forward
 contracts to hedge highly probable forecast export transactions. These
 instruments meet the Management''s foreign exchange risk management
 objectives and also qualify for hedge accounting as per the principles
 of hedge accounting. The market value of instruments outstanding at the
 close of the year is a gain of Rs.9.38 crore as against a gain of Rs.
 2.92 crore in the previous year.
 
 The Company has also 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.
 The Company does not benefit by rupee depreciating beyond the
 pre-determined foreign exchange rate. These instruments meet the
 Management''s foreign exchange risk management objectives and also
 qualify for hedge accounting as per the principles of hedge accounting.
 MTM gains/losses in respect of effective hedges is carried to the Hedge
 reserve and ineffectiveness, if any, including the time value of option
 contracts is recognised in the results, as per the principles of
 Accounting Standard 30. The market value of instruments outstanding at
 the close of the year indicate a gain aggregating to Rs.3.50 crore as
 against a gain of Rs. 53.22 crore in the previous year.
 
 The time value of option contracts from the current year aggregating a
 net gain of Rs. 105.49 crore after reversals, has been recognised as
 ''Other income'' being recurring in nature, against a net loss of Rs.
 50.22 crore in the previous year recognised as ''Other expenses''.
 
 Risk Management Policy and other disclosures
 
 The exports of the Company, presently constituting substantial portion
 of the turnover, are at prices predetermined for each product in each
 region. These prices are fixed in USD based on an assumed USD/INR rate.
 (Budgeted rate of realisation). Exports are then effected at such price
 and hence it is desirable for the Company to shield itself from adverse
 movements in forex rates at a future date.
 
 The Company also imports raw materials and components for its
 motorcycles etc. However, the value of such imports is not material as
 compared to the value of exports. Nevertheless, the Company may wish to
 secure its procurement prices in terms of INR to be able to forecast
 its pricing and profitability. Consequently, the Company may wish to
 hedge such exposures, future and current, to achieve the aforesaid
 objective.
 
 The exchange rate between the Indian rupee and foreign currencies has
 changed substantially in recent periods and may continue to fluctuate
 substantially in the future. Consequently, the Company uses derivative
 financial instruments, such as foreign exchange forward and option
 contracts, to mitigate the risk of changes in foreign currency exchange
 rates in respect of its forecasted cash flows and trade receivables.
 
 The details in respect of the outstanding foreign exchange forward
 contracts including range forward and par forward contracts are given
 below. These contracts are due for maturity between one to twelve
 months. The table below summarises the notional amounts (amounts of
 contracts booked and outstanding) of foreign currency forward contracts
 into relevant maturity groupings based on the remaining period as at
 the 31 March 2016:
 
 In respect of foreign currency derivative contracts designated as cash
 flow hedges for par forward contracts, the Company has recorded a net
 gain of Rs. 9.38 crore and Rs.2.92 crore, as a component of equity
 (Hedge reserve) as at 31 March 2016 and 2015 respectively and a net
 gain of Rs. 2.33 crore and a net gain of Rs.8.40 crore as part of
 revenue during the year ended 31 March 2016, and 2015 respectively.
 
 In respect of foreign currency derivative contracts designated as cash
 flow hedges for range forward contracts, the Company has recorded a net
 gain of Rs. 27.12 crore and Rs. 182.32 crore, as a component of equity
 (Hedge reserve) as at 31 March 2016 and 2015 respectively and a net
 gain of Rs. 19.18 crore and a net gain of Rs. 85.10 crore as part of
 revenue during the year ended 31 March 2016 and 2015 respectively and a
 gain of Rs. 0.13 crore (previous year Rs.Nil) to the Statement of
 Profit and Loss on a break in the designation of the hedge.
 
 Amount that was removed from appropriate equity account (Hedge reserve
 account) during the year ended 2016 and 2015 in respect of forecast
 transaction for which hedge accounting had previously been used, but
 which is no longer expected to occur is a gain of Rs.0.13 crore and
 previous year Rs.Nil respectively.
 
 Amount that was removed from appropriate equity account (Hedge reserve
 account) during the period and included in the initial cost or other
 carrying amount of a non-financial asset or non-financial liability
 whose acquisition or incurrence was a hedged highly probable forecast
 transaction is Rs. Nil.
 
 Amount in respect of the ineffectiveness which relates to time value of
 option contracts recognised in the Statement of Profit and Loss that
 arises from cash flow hedges is a loss of Rs. 23.62 crore as on 31
 March 2016.
 
 In respect of the Company''s foreign currency derivative contracts
 outstanding as on 31 March 2016, a 10% increase in the exchange rates
 of the currency, underlying such contracts, as given by the banks would
 have resulted in an adverse movement by approximately Rs.360.32 crore
 in the fair value of outstanding contracts.
 
 In respect of the Company''s foreign currency derivative contracts
 outstanding as on 31 March 2016, a 10% decrease in the exchange rates
 of the currency, underlying such contracts, as given by the banks would
 have resulted in a positive movement by approximately Rs. 560.58 crore
 in the fair value of outstanding contracts.
 
 Counter-party risk
 
 Counter-party risk encompasses settlement risk on foreign currency
 derivative contracts. Exposure to these risks is closely monitored and
 kept within predetermined parameters. The Company does not expect any
 losses from non-performance by these counter-parties.
 
 The Company''s policy is to transact with creditworthy banks, which are
 reviewed on an on-going basis. The following table depicts that the
 majority of the foreign currency derivatives are placed in highly rated
 banks:
 
 2. Considering the Company has been extended credit period upto 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.  Information in this regard is on basis of
 intimation received, on requests made by the Company, with regards to
 registration of vendors under the said Act.
 
 3. The consolidated financial statements of the Company along with its
 subsidiaries are attached to these standalone financial statements. The
 details of the group regarding the nature of relationship and the basis
 of consolidation can be referred to in note 1 to the said consolidated
 financial statements.
 
 4. Previous year figures
 
 Previous year figures have been regrouped wherever necessary to make
 them comparable with those of the current year.
 
 5. Miscellaneous
 
 a.  Rs. 1 crore is equal to Rs. 10 million.
 
 b.  Amounts less than Rs. 50,000 have been shown at actual against
 respective line items statutorily required to be disclosed
Source : Dion Global Solutions Limited
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