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BGR Energy Systems
BSE: 532930|NSE: BGRENERGY|ISIN: INE661I01014|SECTOR: Infrastructure - General
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« Mar 13
Notes to Accounts Year End : Mar '14
A. COMPANY OVERVIEW
 
 BGR Energy Systems Limited (''the company'') is a public limited company
 incorporated under the provisions of the Companies Act, 1956. Its
 equity shares are listed on Bombay Stock Exchange (''BSE'') and National
 Stock Exchange (''NSE'').  The company is a manufacturer of capital
 equipments for Power Plants, Petrochemical Industries, Refineries,
 Process Industries and undertakes turnkey Balance of Plant (''BOP'') and
 Erection Procurement and Construction (''EPC'') contracts for Power
 plants. The company has been achieving its objectives through its five
 business units: Power projects, Electrical projects, Oil and Gas
 equipment, Environmental engineering and Air Fin Coolers.
 
 ii. Contingent liabilities
 
 The company recognizes contingent liability for disclosure in notes to
 accounts, if any of the following conditions is fulfilled:
 
 a) a possible obligation that arises from past events and the existence
 of which will be confirmed only by the occurrence or non-occurrence of
 one or more uncertain future events not wholly within the control of
 the enterprise; or
 
 b) a present obligation that arises from past events but is not
 recognized because:
 
 – it is not probable that an outflow of resources embodying economic
 benefits will be required to settle the obligation; or
 
 – a reliable estimate of the amount of the obligation cannot be made.
 
 b.  Terms/rights attached to equity shares
 
 The company has one class of shares referred to as equity shares having
 a par value of Rs. 10. Each holder of equity shares is entitled to one
 vote per share.
 
 c.  Nil (540,00,000) shares out of the issued, subscribed and paid up
 share capital were alloted as bonus shares in the last five years by
 capitalization of profits.
 
 a) The balance in project specific escrow accounts have been netted off
 against respective project''s working capital loan accounts.
 
 b) The company has availed working capital loans on pari-passu basis
 from State Bank of India and State Bank of Hyderabad. These loans are
 secured by hypothecation of inventories, trade receivables and movable
 assets of the capital goods segment of the company. The loans from
 State Bank of India and State Bank of Hyderabad are further secured by
 a second charge on the fixed assets of the company.
 
 c) The company has availed contract specific working capital loans from
 State Bank of India, State Bank of Hyderabad, State Bank of Travancore,
 State Bank of Patiala, State Bank of Bikaner & Jaipur, State Bank of
 Mysore, IDBI Bank, Punjab National Bank, Vijaya Bank, Indian Bank,
 Indian Overseas Bank, Corporation Bank, Allahabad Bank, Bank of India,
 Andhra Bank, Central Bank of India, Syndicate Bank, Axis Bank, ICICI
 Bank, ING Vysya Bank Ltd, Export Import Bank of India, Union Bank of
 India and The Karur Vysya Bank Limited. These loans are secured by
 hypothecation of inventories, trade receivables and movable current
 assets of the respective contracts. The participating banks share the
 securities on pari-passu basis.
 
 (a) Plant and equipment include original cost of Rs. 792 lakhs (Rs. 792
 lakhs), which are jointly owned along with a Joint Venture, of which
 the company is a member
 
 (b) Office fixtures and office equipments includes original cost of Rs. 7
 lakhs (Rs. 7 lakhs), which are jointly owned along with subsidiary
 companies.
 
 (c) Buildings include original cost of Rs. 1642 lakhs (Rs. 1169 lakhs),
 which are constructed on lease hold land.
 
 (d) Impairment loss recognised in the statement of profit and loss
 during the financial year for office equipments & furniture and
 fixtures is Rs. 32 lakhs (Rs. 81 lakhs) (refer Note 41).
 
 2.1. Other Loans and advances include dues from customers and tax
 refund (net of provision for taxation) from the Government.
 
 2.2. Cochin Project: The end client of Cochin Port Road Connectivity
 Project viz., Cochin Port Road Company Ltd., (SPV of NHAI) terminated
 the contract on May 28, 2007. Consequently, the end client encashed BGs
 for a value of Rs. 1270 lakhs furnished by the company on behalf of MECON
 – GEA (JV). The main contractor viz., MECON – GEA (JV) contested the
 termination of the contract. The disputes after having been reviewed by
 the Dispute Review Board are now subject to arbitration. The Arbitral
 Tribunal has passed preliminary order in favour of the J V, which is
 under challenge before the High Court of Delhi. The High Court of Delhi
 has passed the judgement recommending that the Arbitral Tribunal permit
 the NHAI to contest their disputes and to adjudicate the same on
 merits. The final arguments before the Arbitral Tribunal is listed for
 hearing in August'' 2014. The arbitral award is expected in due course
 of time. Based on legal opinion, the company has identified a sum of Rs.
 1654 lakhs (Rs. 1654 lakhs) as at March 31, 2014 as recoverable advances
 from the end client through the JV and is grouped under other loans and
 advances.
 
 2.3 Tuticorin Project: The end client of Tirunelveli – Tuticorin Port
 Connectivity Project viz., Tuticorin Port Road Company Ltd (SPV of
 NHAI) terminated the contract and encashed BGs for aggregate value of Rs.
 2652 lakhs and the same were restituted as per orders of the High Court
 of Madras (Madurai Bench). The disputes, including termination of
 contract, after having been reviewed by the Disputes Review Board are
 now subject to arbitration. The proceeding before the Arbitral Tribunal
 are in an advanced stage. In view of these facts, the company has
 identified the sum of Rs. 83 lakhs (Rs. 83 lakhs) as at March 31, 2014 as
 recoverable advances from the end client through the JV and is grouped
 under other loans and advances.
 
 3.1. Trade receivables – Others, includes retention amount of Rs. 150898
 lakhs (Rs. 127332 lakhs) which, in accordance with the terms of the
 contracts were not due for payments as at March 31, 2014
 
 3.2. During the year, the company and State Company for Oil Projects,
 Iraq (Client) terminated with mutual consent the contract for two gas
 development projects. In line with the mutual terms of settlement, the
 company has accounted a loss of Rs. 202 lakhs (net of provisions) and the
 same is included under trade receivables written off. (refer Note 27)
 
 3.3. The company has sought confirmation of balances of major trade
 receivables. In cases where letters of confirmation have been received
 from parties, book balances have been reconciled and adjusted, if
 required. In other cases, balances in accounts of trade receivables
 have been taken as per books of account.
 
 4. EMPLOYEE STOCK OPTION PLANS
 
 Stock option granted to the employees under the stock option scheme
 established are evaluated as per the accounting treatment prescribed by
 the SEBI (Employee Stock Option Scheme and Employee Stock Purchase
 Scheme) Guidelines, 1999. The Company follows the intrinsic value
 method of accounting for the options and accordingly, the excess of
 value of the stock options as determined by an independent valuer on
 the date of grant over the exercise price of the options, if any, is
 recognized as deferred employee compensation cost and is charged to the
 statement of profit and loss.
 
 Employee Stock Option Scheme – 2007
 
 Pursuant to the decision of the shareholders, at their meeting held on
 July 11, 2007, the company has established an ''Employee Stock Option
 Plan 2007'' (''ESOS 2007'' or ''the Scheme'') to be administered by the
 Compensation Committee of the Board of Directors. ESOS 2007 provides
 for grant of options amounting to not more than 1.5% of the issued and
 paid up equity capital of the company outstanding at any point of time
 to officers, directors and key employees to purchase equity shares of
 face value of Rs. 10 each, with such option conferring a right upon the
 employee to apply for one equity shares of the company, in accordance
 with the terms and conditions of such issue. The exercise price of the
 option is Rs. 408.
 
 5. PARTICULARS OF RELATED PARTIES List of related parties
 
 a.  Subsidiary companies
 
 i.  Progen Systems and Technologies Limited ii.  BGR Boilers Private
 Limited iii.  BGR Turbines Company Private Limited iv.  Sravanaa
 Properties Limited
 
 b.  Associate company – Nil
 
 c.  Other companies (enterprises where significant influence exists and
 enterprises where key management personnel have significant influence)
 
 i.  GEA Cooling Tower Technologies (India) Private Limited
 
 ii.  GEA BGR Energy System India Limited
 
 iii.  Germanischer Lloyd Industrial Services (India) Private Limited
 
 iv.  Mega Funds India Limited
 
 v.  Sasikala Estate Private Limited
 
 vi.  Schmitz India Private Limited
 
 vii.  Cuddalore Powergen Corporation Limited
 
 viii. ANI Constructions Private Limited
 
 ix.  Nannilam Property Private Limited
 
 x.  Pragathi Computers Private Limited
 
 xi.  BGR Odisha Powergen Limited
 
 xii.  BGR Investment Holdings Company Limited
 
 xiii.  BGR Power Limited
 
 d.  Joint ventures
 
 Mecon – GEA Energy System (India) Limited (JV)
 
 e.  Key management personnel
 
 i.  Mr. B.G.Raghupathy Chairman and Managing Director (till July 28,
 2013)
 
 ii.  Mr.A.Swaminathan Joint Managing Director and CEO (Director - Sales
 & Marketing till September 30, 2013)
 
 iii.  Mr. V.R. Mahadevan Joint Managing Director (Director -
 Technologies & HR till September 24, 2013)
 
 iv.  Mr. K. Chandrashekhar Director - Projects
 
 v.  Ms. Swarnamugi Karthik Director - Corporate Strategy
 
 f.  Relatives of key management personnel
 
 i.  Ms. Priyadarshini Raghupathy (Daughter of Mr.B.G.Raghupathy and
 Mrs. Sasikala Raghupathy) ii.  Ms. Vaani Raghupathy (Daughter of
 Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy) iii.  Mr. Arjun Govind
 Raghupathy (Son of Mr.B.G.Raghupathy and Mrs. Sasikala Raghupathy)
 
 Party-wise disclosure of related party transactions:
 
 1.  Sales represent, GEA Cooling Tower Technologies (India) Private
 Limited Rs. 2736 lakhs (Rs. 6454 lakhs).
 
 2.  Purchases represent, Progen Systems and Technologies Limited Rs. 260
 lakhs (Rs. 21 lakhs), GEA Cooling Tower Technologies (India) Private
 limited Rs. 2452 lakhs (Rs. 3903 lakhs), GEA BGR Energy System India
 Limited Rs. 41 lakhs (Rs. 92 lakhs), BGR Boilers Private Limited Rs. 17707
 lakhs (Rs. 31 lakhs), BGR Turbines Company Private Limited Rs. 492 lakhs (Rs.
 Nil).
 
 3.  Investments made represent, Sravanaa Properties Limited Rs. Nil (Rs.
 12787 lakhs).
 
 4.  Sale of Investments represent, BGR Investment Holdings Company
 Limited Rs. 34 lakhs (Rs. Nil), BGR Power Limited Rs. 10 lakhs (Rs. Nil).
 
 5.  Remuneration to key management personnel represents, Mr.
 B.G.Raghupathy Rs. 44 lakhs (Rs. 1319 lakhs), Mr. T. Sankaralingam Rs. Nil (Rs.
 95 lakhs), Mr. V.R. Mahadevan Rs. 147 lakhs (Rs. 122 lakhs), Mr. A.
 Swaminathan Rs. 206 lakhs (Rs. 206 lakhs), Mr. K ChandrashekharRs. 97 lakhs
 (Rs. 40 lakhs), Mrs. Swarnamugi KarthikRs. 88 lakhs (Rs. 13 lakhs).
 
 6.  Remuneration to relatives of key management personnel represent,
 Mrs. Swarnamugi Karthik Rs. Nil (Rs. 16 lakhs), Mrs.Priyadarshini
 Raghupathy Rs. 32 lakhs (Rs. 8 lakhs), Ms. Vaani Raghupathy Rs. 8 lakhs (Rs. 3
 lakhs), Mr. Arjun Govind Raghupathy Rs. 4 lakhs (Rs. 3 lakhs).
 
 7.  Rent paid represents, GEA BGR Energy System India Limited. Rs. 0.28
 lakhs (Rs. 0.34 lakhs), Sasikala Estate Private Limited Rs. 89 lakhs (Rs. 106
 lakhs), ANI Construction Private Limited Rs. 9 lakhs (Rs. 9 lakhs). Mr &
 Mrs B G Raghupathy Rs. 42 lakhs (Rs. 45 lakhs), Sravanaa Properties Limited
 Rs. 18 lakhs (Rs. 5 lakhs).
 
 8.  Purchase of fixed assets represent, GEA Cooling Tower Technologies
 (India) Private Limited Rs. Nil (Rs. 16 lakhs).
 
 9.  Sale of fixed assets represent, BGR Boilers Private Limited Rs. Nil
 (Rs. 31 lakhs).
 
 10.  Others represent, royalty to Mr. B.G. RaghupathyRs. 8 lakhs (Rs. 25
 lakhs), Mrs. Sasikala RaghupathyRs. 17 lakhs (Rs. Nil).
 
 11.  Advances given represent, Progen Systems and Technologies Limited
 Rs. 931 lakhs (Rs. 34 lakhs), BGR Boilers Private Limited Rs. 38192 lakhs (Rs.
 1387 lakhs), BGR Turbines Company Private Limited Rs. 241 lakhs (Rs. 12577
 lakhs), GEA BGR Energy Systems India Limited Rs. 60 lakhs (Rs. 1 lakh), GEA
 Cooling Tower Technologies (India) Private Limited Rs. 474 lakhs (Rs. 230
 lakhs).
 
 12.  Repayment of advance given represents, Mega Funds India Limited Rs.
 Nil (Rs. 4 lakhs).
 
 13.  Gurantees given represent, Progen Systems and Technologies Limited
 Rs. 51 lakhs (Rs. 208 lakhs), GEA Cooling Tower Technologies (India)
 Private limited Rs. 661 lakhs (Rs. 661 lakhs).
 
 14.  Balances outstanding (Net) represent, Progen Systems and
 Technologies Limited Rs. 1277 lakhs (Rs. 554 lakhs), BGR Boilers Private
 Limited Rs. 22898 lakhs (Rs. 1688 lakhs), BGR Turbines Company Private
 Limited Rs. 12348 lakhs (Rs. 12599 lakhs), GEA Cooling Tower Technologies
 (India)Private Limited Rs. 74 lakhs (Rs. 1111 lakhs), GEA BGR Energy System
 India Limited Rs. 66 lakhs (Rs. 21 lakhs (cr. bal)), Cuddalore Powergen
 Corporation Limited Rs. 671 lakhs (Rs. 671 lakhs), Nannilam Property
 Private Limited Rs. 508 lakhs (Rs. 508 lakhs), Mega Funds India Limited Rs.
 39 lakhs (Rs. 39 lakhs), Schmitz India Private Limited Rs. 60 lakhs (Rs. 60
 lakhs), B.G.Raghupathy Rs. 8 lakhs (cr.bal.) (Rs. 3 lakhs (cr. bal)),
 Sravanaa Properties Limited Rs. 6 lakhs (Rs. 6 lakhs), Sasikala Estate
 Private Limited Rs. 7 (cr.bal) lakhs (Rs. Nil), Mrs. Sasikala RaghupathyRs.
 39 lakhs(cr. bal)(Rs. Nil)
 
 15.  CONTINGENT LIABILITIES, GUARANTEES, CAPITAL COMMITMENTS AND OTHER
 COMMITMENTS
 
                                                         Rs. in lakhs
 Particulars                                    As at          As at
                                       March 31, 2014  March 31, 2013
 
 A Contingent liabilities
   Claims against the company not 
   acknowledged as debt
 
 a) On account of sales tax                4222             4228
 
 b) On account of income tax*             10848            23045
 
 c) On account of service tax**              37               37
 
 d) On account of contractual obligations  2350             2350
 
 e) On account of royalty                  4547             4538 
 
 B Guarantees
 
   Guarantees and counter guarantees given 
   on behalf of subsidiary                  712              869
   and other company
 
 C  Capital commitments
 
   Estimated amount of contracts remaining 
   to be executed on capital account 
   (net of advances)                        817              809
 
 D Other commitments
 
   Commitments to fund subsidiaries        5681             7180
 
 * Income-tax demand includes a sum of Rs. Nil (Rs. 11495 lakhs) which has
 been contested by the IT authorities before the Income-Tax Appellate
 Tribunal.
 
 ** Service tax demand represents a sum ofRs. 37 lakhs (Rs. 37 lakhs) which
 has been contested by the service tax authorities before the Customs
 Excise and Service Tax Appellate Tribunal.
 
 16.  IMPAIRMENT OF ASSETS
 
 a.  Cash generating units :
 
 There is no impairment loss in cash generating units and hence no
 provision was made in the financial statements.
 
 b.  Other assets :
 
 The company has made a provision of Rs. 32 lakhs (Rs. 81 lakhs) in the
 books of accounts towards impairment of other fixed assets based on the
 technicial valuation.
 
 17.  In respect to construction contracts, cost of material includes
 value added tax, central sales tax, works contract tax and service tax.
 
 18.  Interest income from fixed deposits have been netted off with
 interest expense on working capital facilities.
 
 19.  During the last quarter, search operations under Section 132 of
 the Income-tax Act 1961, was carried out by the Income-tax Authorities,
 for which the company has provided statements and documents.
 
 20.  (a) Current tax includes Rs. Nil (Rs. 160 lakhs) being provision for
 income-tax in respect of earlier years.  (b) MAT credit entitlement
 includes Rs. 395 lakhs (Rs. Nil) being MAT credit in respect of earlier
 years.
 
 21. PREVIOUS YEAR FIGURES
 
 Figures of previous year have been regrouped / rearranged, wherever
 required to conform to the current year presentation.
Source : Dion Global Solutions Limited
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