Indo Rama Synthetics (India)

1. In pursuance of notification no. GSR 225 (E) dated 31 March 2009 of
 Ministry of Corporate Affairs with retrospective amendment (with effect
 from 7 December 2006) to Accounting Standard (AS-11) on Effects of
 changes in foreign exchange rates the Company has adopted the option
 for exchange difference arising on reporting of long term foreign
 currency monetary items as disclosed in note 2(m) (iii) above. This has
 resulted in gross block higher by Rs. 483,681 thousand, depreciation
 higher by Rs. 29,458 thousand and profit before tax higher by Rs.
 454,223 thousand. The unamortised amount in FCMITD account for the year
 ended March 31 2009 is Rs. 21,474 thousand.
 
 During the previous year ended 31 March 2008, based on the legal
 opinion obtained, the Company had adjusted Rs. 384,149 thousand the
 foreign exchange fluctuations on amounts borrowed for acquisition of
 imported fixed assets, which was at variance to the treatment
 prescribed in Accounting Standard (AS-11) on Effects of Changes in
 Foreign Exchange Rates notified in the Companies (Accounting
 Standards) Rules 2006. If the Company would have followed the
 requirements of AS-11, the profit after
 tax for the previous year would have reduced by Rs. 238,666 thousand.
 
 2.  During the current year 2008-2009 in accordance with Expert
 Advisory Committee Opinion, the Company has effected change in its
 accounting policy with regard to accounting of Export Benefits under
 Duty Exemption Advance License Scheme. Whilst hitherto, the company
 was making provisions for Customs duty at the time of import under
 advance license in accordance with above stated opinion, such
 provisions are now not made at the time of import. As a result, write
 back of provision has resulted in decrease in loss for the year by Rs.
 202,J 79 thousand.
 
 3.  During current year 2008-2009, in pursuance of announcement dated
 29 March 2008 by the Institute of Chartered Accountants of India on
 Accounting of Derivatives, mark to market loss on outstanding
 derivative instruments as on 31 March 2009 the Company has recognized
 mark to market loss aggregating Rs. 44,484 thousand, arising from
 hedging transaction undertaken by the Company for its trading or
 speculative purpose. Whilst hitherto, during previous year 2007-2008
 the Company had not provided for mark to market loss aggregating Rs.
 117,447 thousand on outstanding derivatives instrument as on 31 March
 2008. The same has been disclosed as a prior period item in the current
 years profit and loss account.
 
 4.  The Company is carrying MAT Credit Entitlement amounting to Rs.
 99,155 thousand (Previous year Rs. 99,155 thousand) which represents
 that portion of MAT liability, which can be recovered, based on the
 provisions of Section 115JAA of the Income-tax Act, 1961. The
 management based on the present trend of profitability and also the
 future profitability projections, is of the view that there would be
 sufficient taxable income in foreseeable future, which will enable the
 Company to utilize MAT Credit Entitlement.
 
 5.  Some of the equipment, vehicles and office premises are obtained on
 operating lease. There are no contingent rents in the lease agreements.
 The lease terms are mainly for 1-3 years and are renewable by mutual
 consent of both the parties. There is no escalation clause in the lease
 agreements. There are no restrictions imposed by lease arrangements.
 There are no sub-leases.
 
 6.  Segmental information:
 
 (a) Business segment
 
 The Company primarily deals in polyester business and in line with the
 global trend, has viewed Polyester Staple Fibre, Polyester Filament
 Yarn and Draw Texturised Yarn as one integrated business. The Company
 is also engaged in sale of surplus power through grid. Accordingly, the
 Company has organised its operations into two major business segments
 i.e. Polyester Division and Power Division.
 
 7.  Related party disclosure
 
 (i) Names of related parties:
 
 Enterprises having significant influence over the Company Brooke Grange
 Investments Limited (BGIL)
 
 Key management personnel (KMP) Mr. O.P. Lohia, Chairman cum managing
 director
 
 _ Mr. Vishal Lohia, Whole time director
 
 Relatives of key management Personnel Mr. Ml. Lohia
 
 Mrs. Urmila Lohia
 
 Mrs. Aruna Goenka
 
 Mr. A. Lohia
 
 Mr. S.P. Lohia
 
 Mrs. Rimple Lohia
 
 Mrs. Ritika Kumar
 
 Enterprises owned or significantly influenced by key Indo Rama Retail
 Holdings Private Limited (IRRHPL)
 
 management personnel or their relatives PT Indo Rama Synthetics TBK
 (PTIS)
 
 Indo Rama Petrochem Limited (IRPL)
 
 8.  Capital commitments
 
 Estimated amount of contracts remaining to be executed on capital
 account and not provided for (Net of advances) Rs. 186,424 thousand
 (Previous year Rs. 39,986 thousand).
 
 9.  Contingent liabilities not provided for
 
 (a) (i) Excise duty demands on the difference between the price charged
 to domestic customers and physical exporters in respect of deemed
 export sales under advance license Rs. 6,480 thousand (Previous year
 Rs. 6,480 thousand).
 
 (ii) Show cause received from excise authorities in respect of down
 gradation of PFY and special discounts passed to customers Rs. 26,035
 thousand (Previous year Rs.  26,035 thousand).
 
 (iii) Differential duty demand on DTY despatches claimed under
 exemption notification Rs. 256,927 thousand (Previous year Rs. 256,927
 thousand).
 
 (iv) Disallowance of service tax credits and other demands Rs. 32,565
 thousand (Previous year Rs. 33,077 thousand).
 
 (v) Excise duty demand on usage of cenvat for payment of national
 calamity contingent duty (NCCD) and demand of duty on freight and
 insurance etc. Rs. 99,919 thousand (Previous year Rs. 22,554 thousand).
 
 (vi) Demand for cenvat reversal on goods transferred to Indo Rama
 Textiles Limited at the time of de-merger Rs. 15,787 thousand (Previous
 year Rs. 15,787 thousand).
 
 (vii) Demand for differential duty for goods transferred to other units
 Rs. 6,204 thousand (Previous year Rs. 17,233 thousand).
 
 (viii) Excise duty demand for Modvat taken on capital goods capitalized
 in Indo Rama Petrochemicals Limited Rs. 169,496 thousand (Previous year
 Rs. 76,210 thousand).
 
 (b) Demand made by sales tax authorities in respect of sale of scrap
 and others Rs. 5,605 thousand (Previous year Rs. 5,798 thousand).
 
 (c) Demand made by income tax authorities for the assessment years
 2000-01 to 2005-06 in respect of disallowances of various expenses Rs.
 37,168 thousand (Previous year Rs.  62,053 thousand).
 
 (d) Various other claims made against the Company by ex- employees,
 vendors, customers and other authorities not acknowledged as debts Rs.
 15,733 thousand (Previous year Rs. 13,502 thousand).
 
 (e) Cases pending with Labour Courts (amount not ascertainable).
 
 Based on the favourable decisions in similar cases / legal opinions
 taken by the Company / discussions with the solicitors etc., the
 Company believes that it has good case in respect of all the items
 listed above and hence no provision thereagainst is considered
 necessary.
 
 10. Employee benefit obligations
 
 The Company has a defined benefit gratuity plan. Every employee who has
 completed five years or more of service gets a gratuity on departure at
 15 days salary (last drawn salary) for each completed year of service.
 Unavailed leaves are encashed (on last
 
 drawn salary) at the time of separation from the Company subject to a
 maximum of 120 days.
 
 Note:
 
 a) Approval for paying managing directors remuneration has been
 obtained from Central Government.
 
 b) As the future liability for gratuity and leave encashment is
 provided on an actuarial basis for the Company as a whole, the amount
 pertaining to the managing director / whole time director is not
 ascertainable and therefore, not included above.
 
 Note:
 
 The Company has gone for an early adoption of AS 15 (Revised 2005)
 Employee Benefits, during 2006-2007. Since similar valuations for
 previous years ended 31 March 2006 and 31 March 2005 are not readily
 available with the Company, therefore, disclosures as required by
 paragraph 120(n) of AS-15 (Revised 2005) have not been furnished in
 respect of those years.
 
 11.  Additional information pursuant to the provisions of paragraphs 3,
 4C and 4D of Part II of Schedule VI to the Companies Act, 1956
 
 * As certified by the management
 
 TPA - Tonnes per annum MWPH - Mega watt per hour TPH - Tonnes per hour
 CMPH - Cubic meters per hour
 
 Notes:
 
 1.  Figures in brackets are for previous year.
 
 2.  Sales are after netting of returns out of earlier year sales
 amounting to Rs. 8,621 thousand (Previous year Rs. 12,581 thousand).
 
 3.  PFY of 33,694 MT (Previous year 43,097 MT) has been transferred to
 DTY Division for internal consumption.
 
 4.  Production of PSF are net of Nil MT (Previous year 581 MT)
 manufactured on job work basis for other parties.
 
 5.  Burned Stock of PFY Nil MT (Previous year 1,580 MT) has been
 deducted from closing stock.
 
 6.  Power 192,750 thousand KWH (Previous year 233,530 thousand KWH) has
 been used for internal consumption.
 
 7.  Sales value is inclusive of excise duty.
 
 Notes:
 
 1.  DEPB benefit amounting to Rs. 41,738 thousand (Previous year Rs.
 120,364 thousand) reduced from raw material consumption has not been
 considered above.
 
 2.  The aforesaid details exclude consumption of inter-divisional
 transfers of PFY 33,694 MT (Previous year 43,097 MT).
 
 12.  Previous year Comparatives
 
 Previous years figures have been regrouped where necessary to conform
 to this years classification.omplaints