1 Derivative hedging instruments
The company has adopted the accounting treatment and disclosures in
accordance with the principles laid down in AS 30 and AS 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 indicate a loss aggregating Rs. 212.87 crore as against
a gain in the previous year aggregating Rs. 20.77 crore.
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 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 AS-30.
The market value of instruments outstanding at the close of the year
indicate a loss aggregating Rs. 256.11 crore as against a gain in the
previous year aggregating Rs. 116.46 crore, which was not recognised in
the previous year as a matter of prudence.
Risk management policy and other disclosures
The exports of the company, presently constituting substantial portion
of the turn over, 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
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.
2 Contingent liabilities
(Rs. In Crore)
As at As at
31 March 2012 31 March 2011
a) Claims against the Company not
acknowledged as debts 418.74 422.49
b) Guarantees given by the Company
to banks, on behalf of its subsidiary,
PT Bajaj Auto Indonesia 25.44 23.19
c) Guarantees given by the Company to
Housing Development Finance
for loans to employees 0.12 0.22
d) Excise and Customs demand - matters under dispute and Claims for
refund of Excise Duty, if any, against Excise Duty Refund received in
the earlier year 181.78 122.70
e) Income tax matters - Appeal by company 9.58 -
f) Sales Tax matters under dispute 357.85 328.41
g) Claims made by temporary workmen
Pending before various judicial/appellate authorities 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 Liability Liability
likely to be influenced by the Supreme Courts order unascertained
3 Segment information
Segment information is based on the consolidated financial statements.
4 Previous year figures
The financial statements for the year ended 31 March 2011 had been
prepared as per the then applicable, pre-revised Schedule VI to the
Companies Act, 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act, 1956, the financial statements for the year
ended 31 March 2012 are prepared as per Revised Schedule VI.
Accordingly, the previous year figures have also been re-classified to
conform to this year''s classification. The adoption of Revised Schedule
VI for previou: year figures does not impact recognition and
measurement principles followed for preparation of financial
Rs. 1 crore is equal to Rs. 10 million.
Amounts less than Rs. 50,000 have been shown at actual against respective
line items statutorily required to be disclosed.