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Ircon International
BSE: 523596|SECTOR: Construction & Contracting - Civil
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Ircon International is not traded in the last 30 days
Ircon International is not listed on NSE
Mar 09
Notes to Accounts Year End : Mar '10
1) Contingent liabilities consist of:
 
 a) Claims against the Company not acknowledged as debt Rs. 2736.49
 million (Rs. 4603.43 million). Against this the Company has counter
 claims of Rs. 1014.16 million (Rs. 889.64 million). In case claims
 against the Company do materialise, claims for Rs. 1028.93 million
 (Rs.3224.66 million) will be reimbursable from the clients. Interest on
 claims is not considered, being unascertainable.
 
 b) Few cases relating to employees/others are pending in the Courts
 against the Company in respect of which the liability is not
 ascertainable.
 
 c) Direct and Indirect disputed tax demands under appeal Rs. 1320.26
 million (Rs.937.04 million) of which Rs.314.44 million (Rs. 252.40
 million) are reimbursable from the clients and Rs. Nil (Rs. Nil) from
 the sub- contractors.
 
 d) Pending disposal of application for extension of time by clients,
 Company is contingently liable to pay liquidated damages to the extent
 of Rs.61.10 million (Rs. 8.81 million)
 
 e) Outstanding Bank Guarantee of Rs.1.45 million (Rs.1.45 million ) to
 CIDCO towards flats.
 
 f) Claims of Provident Fund Commissioner, J & K for Rs.17.55 million (
 Rs. 17.55 million )..
 
 g) Ircon International Limited (the Company) and Soma Enterprises
 Limited (Soma) incorporated a joint venture Company called Ircon-Soma
 Tollway Private Limited (ISTPL) on 19.4.2005 with 50% shareholding
 each, for execution of a highway project awarded by NHAI to ISTPL
 (after its incorporation) in terms of the concession agreement between
 NHAI and ISTPL dated 28th September 2005 for Improvement, Operation and
 Maintenance, Rehabilitation and Strengthening of Existing 2-lane Road
 and its widening to a 4- lane divided Highway on NH-3 (Pimpalgaon-
 Dhule Section ) in the State of Maharashtra on Build, Operate and
 Transfer (BOT) basis , for a period of 20 years ( 3 years for
 construction and 17 years for toll collection) at an approximate cost
 of Rs. 6060.40 million (Rs. 6060.40 million).
 
 The Companys equity investment in the ISTPL is Rs 638.70 million
 (Rs.638.70 million). To finance the debt portion of the project, ISTPL
 has arranged a term loan of Rs. 4500 million from a consortium of eight
 banks, lead by State Bank of India. To secure this term loan the
 Company along with Soma has by way of promoters support executed a
 Sponsor Support Undertaking and a Consent and agreement on 7th
 August 2006 , in favour of State Bank of India (Security trustee and
 Lenders agent), wherein both the Company & Soma have jointly and
 severally undertaken to extend additional equity/provide loans for
 meeting any cost overrun , shortfall in the agreed debt-service ratio,
 temporary shortfall on account of delay in receipt of grant and
 termination payment from NHAI. In the current year the Company & Soma
 have contributed Rs 100 million each as loan to meet the cost overrun.
 On 25th October 2009 the toll plaza for 99km stretch, located at
 Chandwad has become operational and toll collection started. The
 balance stretch of 19.158 km has been provisionally declared complete
 on 03rd March 2010 and toll collection at Dhule Plaza has also
 commenced from 19th April 2010.
 
 2) Estimated amount of contracts remaining to be executed on capital
 account (net of advances) is Rs. 5.66 million (Rs 254.70 million)
 
 3) Basic earnings per share are computed by dividing net profit after
 tax Rs.1821.83 million (Rs.1401.82 million) by (9,898,000) fully paid
 equity shares of Rs.10 each. Diluted Earnings per share is not
 applicable, as there is no dilution involved.
 
 4) (a) Some of the balances shown under debtors, advances, creditors
 and material lying with third parties are subject to confirmation /
 reconciliation. The Company has been sending letters for confirmation
 to parties included in the above.
 
 (b)ln the opinion of the management, the value of current assets, loans
 and advances on realization in the ordinary course of business, will
 not be less than the value at which these are stated in the Balance
 Sheet.
 
 5) Disclosure regarding Leases:
 
 I.  Operating Leases for Locos
 
 a) The Company is also engaged in leasing of locomotives. Total 25
 locomotives are on lease to foreign client as on 31.03.2010. The
 validity of lease has been extended upto 31.12.2010.  ^=~=^
 
 II Operating Lease for Premises
 
 The Companys leasing arrangements are in respect of operating leases
 of premises for residential use of employees, offices, guesthouses and
 transit camps. These leasing arrangements, which are not non
 cancellable, are mostly for one year, and are usually renewable on
 mutually agreed terms. The Expenses Schedule (Sch O) under Employee
 Remuneration and Benefits includes Rs. 63.10 million (Rs. 77.60
 million) towards lease payments, net of recoveries in respect of
 premises for residential use of employees. Lease payments in respect of
 premises for offices, guesthouses and transit camps aggregate to Rs.
 32.93 million (Rs.38.75 million) shown as rent in Schedule O.
 
 6) Related Party disclosures:
 
 Joint venture Companies-Company named as CCFB ( Compahnia Dos Caminhos
 De Ferro Da Beira SARL) of Ircon, RITES & CFM ( Mozambique Railways),
 and a JV Company named as Ircon Soma Tollway Private Limited.
 
 b) Key management personnel:
 
 Directors: - S/Shri Mohan Tiwari, Madan Lal.K K Garg and Deepak
 Sabhlok.
 
 7) Disclosures in respect of Joint-Ventures
 
 # Work completed on 15.6.2007
 
 # # Project closed, payment yet to be received
 
 # # # Work completed on 5.3.2006
 
 @ Project closed, final settlement yet to be made
 
 @@ w.e.f 01.05.2008, the JV partners have changed the nature of
 operation of JV as per which the balance scope of work has been
 bifurcated amongst them as against Joint Control followed earlier. As a
 result the nature of JV has changed from Jointly Controlled Entity
 (JCE) to Jointly Controlled Operation (JCO).Proportionate Consolidation
 method has been followed till 30.4.2008 as per Accounting policy
 No.10(ii) and thereafter accounted for as independent contracts as per
 the Accounting policy No.10(i) of Schedule-Q of the Company in respect
 of JCO.
 
 @@@ On direction of the client Ircon has expelled the other two
 partners Sari Aska Algeria (15%) and Aska Turkey (15%) from the
 consortium. The Client later issued order to stop the work followed
 by communication to close the contract. The contract closure order has
 since been revoked by the Client and the project restarted in the name
 of IRCON on 23.05.2010,
 
 d) Contingent liability towards the Companys share of bank guarantee
 in case of IMCC as on 31.03.2010 is Rs. Nil million (Rs. 21.18
 million).
 
 e) Proportionate share of sales-tax liability in case of IMCC as on
 31.03.2010 Rs. 42.52 million (Rs.42.52 million).
 
 f) Contingent liability towards the Companys share of bank guarantee
 in case of MTG as on 31.03.2010 is Rs. 46.91 million (Rs. 46.71 million
 )
 
 g) Contingent liability towards the Companys share of corporate
 guarantee to Central Excise in case of MTG as on 31.03.2010 is Rs.15.36
 million (Rs.15.36 million)
 
 h) Contingent liability towards the Companys share of bank guarantee
 in case of Ircon-RCS-PFLEIDERERason 31.03.2010 is Rs. 9.10 million
 (Rs.9.10 million )
 
 finance but shareholders agreement was signed for USD 7.5 million only.
 Out of USD 7.5 million, Company had paid USD 1 million during 2008-09
 and USD 1 million during 2009-10. Company had received back entire USD
 2.00 million from CCFB on 29.01.2010. However, interest on loan on USD
 2 million amounting to USD 0.17million still to be received from CCFB.
 
 j) The Company has extended a loan of Rs 100 million to ISTPL JV during
 the year.
 
 k) Commissioner of Service Tax has served a show cause during the year
 raising a demand of Rs 0.98 million (Nil) IMCC has disputed the demand
 and same is pending for adjudication.
 
 I) The assessment by revenue authority for the financial year 2003-04,
 04-05 and 05-06 has resulted into a demand aggregating to Rs 32.49
 million (Nil) as on 31.03.2010 . The IMCC has disputed the assessment
 and have filed appeal at various level, which are pending for 
 adjudication.
 
 II) The Company has carried out the assessment on impairment of
 individual assets by working out the recoverable amount based on lower
 of the net realisable value and carrying cost during the year in terms
 of AS 28 Impairment of Assets issued by the Institute of Chartered
 Accountants of India. There is no impairment loss (Rs. Nil).
 
 8) a) Due to gulf war when payments from clients (including for Samawa
 and Al-muthana Projects executed in Iraq) were not forthcoming. Govt,
 of India (GOI) bailed-out project exporters in Iraq including Ircon
 under Deferred Payment Agreement Protocol (DPA).
 
 Under DPA, the outstanding balances dues as certified by Central Bank
 of Iraq(CBI) to Exim Bank upto Sept. 1995 were settled by GOI by
 issuing bonds in two phases. Subsequent to 2nd phase, CBI had further
 certified (confirmed by Exim Bank in May, 2000) an amount of USD 8.89
 million (equivalent to Rs. 318.21 millions converted at the last
 settlement rate of 1 USD = Rs. 35.802) to Exim Bank, awaiting
 settlement by GOI, for which the Company had conveyed its consent to
 Ministry of Railways vide its letter dt. 26.05.2005 the settlement is
 yet to be approved by GOI. Corresponding to these dues, interest
 payable to sub-contractors on back-to-back basis amounting to USD 4.20
 Million (equivalent to Rs. 150.37 million converted at the last
 settlement rate of 1 USD = Rs. 35.802) has been provided in the books
 of accounts.
 
 b) The accrued interest ,on deferred Iraqi dues and provision for
 interest to sub-contractors (under Deferred Payment Agreement Protocol)
 on back-to-back basis have been translated at the last settlement rate
 (i.e. 1 USD = Rs. 35.802) with the Government of India, based on
 prudence as in previous year. Had the dues been translated at the
 closing exchange rate as on 31.03.2010 as per AS-11, Other Current
 Assets would have been Rs. 954.64 million (increased by Rs. 80.86
 million), Provisions would have been Rs. 6014.58 million (increased by
 Rs. 38.21 million), Profit Before Tax would have been Rs.2682.74
 million (increased by Rs. 42.65 million).
 
 9) The Company, as a voluntary welfare measure, has established an
 irrevocable Trust for providing medical and other benefits to the
 eligible employees who superannuate from the Company/die in harness and
 had contributed Rs. 120 million to the corpus of the Trust during
 financial year 2000-01. The Trust is registered under the provision of
 the Income Tax Act, 1961. The income of the Trust is considered
 sufficient to provide the benefits enumerated in the Trust Deed. The
 Company, however, is not liable for providing such benefits to its
 employees.
 
 10) The Company had taken a policy from Life Insurance Corporation of
 India (LIC) under Group Gratuity Scheme and set up a Gratuity Trust.
 The contributions to LIC were made up to FY 2003-04. Subsequent
 contributions could not be made as the demand from LIC was not
 crystallized. The Gratuity Trust has been dissolved. Accumulated
 balance including interest as on 31.03.2010 in the fund maintained by
 LIC amounting to Rs. 41.07 million (Rs.37.77 million) has been shown as
 a deduction from provision towards Companys liability for gratuity
 made as per actuarial valuation in terms of Accounting Policyno. 17(
 i) ( Schedule L).
 
 11 a) The Company in its Income-Tax returns is claiming deduction under
 Section-80 IA of Income- Tax Act, 1961, in respect of eligible
 construction projects w.e.f. Assessment year 2000-01. Since some of the
 claims have been rejected upto to level of CIT (Appeals), Tax is
 provided without considering the deduction. However CIT(A) has
 considered our claim for the Assessment Year 2004-05, but the
 department has moved to Tribunal against the order of CIT(A). The
 deduction upto AY 2009-10 is Rs. 4434.44 million.( Rs. 3220.53 million)
 The matter is pending before the Tribunal.
 
 b) The Company in its Income-Tax returns is claiming deduction under
 Section-80 IB of Income-Tax Act, 1961, in respect Of housing projects
 w.e.f. Assessment year 2007-08, Tax is provided without considering
 this deduction. The estimated deduction upto AY 2009-10 is Rs. 13.28
 million (Rs. 68.46 million).
 
 12. Disclosure under AS-15
 
 Provident Fund
 
 The Company pays fixed contribution of Provident Fund at a pre
 determined rates to a separate trust, which invest the funds in
 permitted securities; The trust is required to pay a minimum rate of
 interest on contribution to the members of the trust. The amount
 available in the fund including the return on investments is greater
 than the obligation of the Company as per actuarial valuation, hence no
 further provision is considered necessary.
 
 Gratuity 
 
 Every employee who has rendered continuous service of five years or
 more is entitled to get gratuity at 15 days salary for each completed
 year of service subject to a maximum of Rs. 10 lakhs on superannuation,
 resignation, termination, disablement or on death.
 
 The liability is provided on the basis of actuarial valuation.
 
 Post-Retirement Medical Facility (PRMF)
 
 The Company has post retirement medical facility under which medical
 treatment is provided for retired employees and for those who die in
 service (including spouse) for which the Company has created a Medical
 Trust Fund. The amount available in the fund including the return on
 investments is greater than the obligation of the Company as per
 actuarial valuation,
 
 hence no further provision is considered necessary
 
 Leave Encashment
 
 The Company allows earned leave and half pay leave to the employees
 equal to 30 days and 20 days per annum respectively. 50% of the earned
 leave is encashable while in service and maximum of 300 days on
 superannuation. Half pay leave is encashable only on superannuation
 subject to a maximum of 240 days as per the rules of the Company. The
 liability is recognised on the basis of actuarial valuation.
 
 The summarised position of various employee benefit recognised in the
 profit and loss account, balance sheet are as under:
 
 13 i) Amounts due to suppliers under the Micro, Small and Medium
 Enterprises Development Act, 2006 (MSMED Act) as at 31.03.2010 is Rs.
 Nil ( Nil)
 
 ii) The Company has not received any information from any of its
 suppliers of their being a small scale industrial unit. Based on this
 information, there are no amounts due to small-scale industrial
 undertaking, which are outstanding for more than 30 days as on 31st
 March 2010 is Rs. Nil (Nil).
 
 14) Figures in the Balance Sheet, Profit & Loss Account and other
 Schedules are shown in Rupees in million in accordance with the
 approval of the Department of Company Affairs letter No.46/298/2001-CL-
 II dated 13.03.2002.
 
 15) During the year, the Company has changed its Accounting Policy on
 translation of foreign currency of revenue items from yearly average to
 monthly average. Due to this change, foreign exchange loss (net) has
 increased by Rs.52.98 million, other income has decreased by Rs 1.78
 million, operating income has decreased by Rs. 73.03 million and total
 expenditure (excluding foreign exchange gain/loss) has decreased by Rs
 127.79 million. However, net impact on Profit/Loss of the company is
 NIL.
 
 16) The company has formed a wholly owned subsidiary company on 30th
 September, 2009 namely Ircon Infrastructure & Services Limited (IISL)
 and has invested Rs. 4million (including Rs.0.006 million through
 IRCONs nominees) towards shareholders equity with the approval of
 184th BOD held on 30th July, 2009. The certificate of commencement of
 business was issued by ROC on 10th November 2009.
 
 17) During the year Company has changed the accounting treatment of
 loan given to CCFB Mozambique treating it as an Integral Foreign
 Operation instead of Non-Integral Operation. Due to that foreign
 exchange fluctuation reserve created in earlier year has been adjusted.
 This has resulted in net increase in exchange fluctuation gain by
 Rs.35.08 million. Consequently, profit for the year is higher by Rs.
 35.08 million.
 
 18) Previous years figures have been regrouped, rearranged and recast
 wherever necessary to make it comparable to the current years
 classification.
 
 19) Balance Sheet Abstract and Company Business Profile:
 
 V Generic names of three principal products of the Company (as per
 monetary terms) Product Description Other Projects: Turnkey
 Construction
Source : Dion Global Solutions Limited
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