SENSEX NIFTY India | Notes to Account > Cigarettes > Notes to Account from ITC - BSE: 500875, NSE: ITC


BSE: 500875|NSE: ITC|ISIN: INE154A01025|SECTOR: Cigarettes
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« Mar 14
Notes to Accounts Year End : Mar '15
1. Additional Notes to the Financial Statements
 (i) Expenditure incurred under Section 135 of the Companies Act, 2013
 applicable for the first time in 2014-15 on Corporate Social
 Responsibility (CSR) activities - Rs. 214.06 Crores comprising employee
 benefits expense of Rs. 7.61 Crores and other expenses of Rs. 206.45 Crores
 of which Rs. 12.67 Crores is accrued for payment as on 31st March, 2015.
 Such CSR expenditure of Rs. 214.06 Crores excludes Rs. 4.97 Crores being
 the excess of expenditure of salaries of CSR personnel and
 administrative expenses over the limit imposed of 5% of total CSR
 expenditure laid down under Rule 4(6) of the Companies (Corporate
 Social Responsibility Policy) Rules, 2014 for such expenses.
 (ii) Research and Development expenses for the year amount to Rs. 105.79
 Crores (2014 - Rs. 117.18 Crores).
 (iii) Contingent liabilities and commitments:
 (a) Contingent liabilities
 (i) Claims against the Company not acknowledged as debts Rs. 404.88
 Crores (2014 - Rs. 361.50 Crores). Interest on claims, where applicable,
 is estimated to be Rs. 153.37 Crores (2014 - Rs. 121.34 Crores). These
 - Excise duty, VAT / sales taxes and other indirect taxes claims
 disputed by the Company relating to issues of applicability and
 classification aggregating Rs. 314.43 Crores (2014 - Rs. 254.99 Crores).
 Interest on claims, where applicable, is estimated to be Rs. 135.58
 Crores (2014 - Rs. 103.89 Crores).
 - Local Authority taxes/cess/royalty on property, utilities etc. claims
 disputed by the Company relating to issues of applicability and
 determination aggregating Rs. 55.32 Crores (2014 - Rs. 63.62 Crores).
 Interest on claims, where applicable, is estimated to be Rs. 13.47 Crores
 (2014 - Rs. 12.36 Crores).
 - Third party claims arising from disputes relating to contracts
 aggregating Rs. 29.05 Crores (2014 - Rs. 37.36 Crores).  Interest on
 claims, where applicable, is estimated to be Rs.0.14 Crore (2014 - Rs. 1.12
 - Other matters Rs. 6.08 Crores (2014 - Rs. 5.53 Crores). Interest on other
 matters, where applicable, is estimated to be Rs. 4.18 Crores (2014 - Rs.
 3.97 Crores).
 It is not practicable for the Company to estimate the closure of these
 issues and the consequential timings of cash flows, if any, in respect
 of the above.
 (ii) Corporate Guarantee given to Yes Bank Limited for credit facility
 availed by Broadcast Audience Research Council (BARC) outstanding - Rs.
 1.30 Crores (2014 - Nil).
 (b) Commitments
 - Estimated amount of contracts remaining to be executed on capital
 accounts and not provided for Rs. 1432.41 Crores (2014 - Rs. 1528.10
 - Uncalled liability on shares partly paid Rs. 26.40 Crores (2014 - Rs.
 26.40 Crores).
 (iv) Micro, Small and Medium scale business entities:
 A sum of Rs. 24.56 Crores is payable to Micro and Small Enterprises as at
 31st March, 2015 (2014 - Rs. 23.25 Crores). There are no Micro, Small and
 Medium Enterprises, to whom the Company owes dues, which are
 outstanding for more than 45 days during the year and also as at 31st
 March, 2015. This information as required to be disclosed under the
 Micro, Small and Medium Enterprises Development Act, 2006 has been
 determined to the extent such parties have been identified on the basis
 of information available with the Company.
 (v) The Company's significant leasing arrangements are in respect of
 operating leases for premises (residential, office, stores, godowns
 etc.). These leasing arrangements which are not non-cancellable range
 between 11 months and 9 years generally, or longer, and are usually
 renewable by mutual consent on mutually agreeable terms. The aggregate
 lease rentals payable are charged as 'Rent' under Note 28.
 (vi) Derivative Instruments:
 The Company uses forward exchange contracts and currency options to
 hedge its exposures in foreign currency related to firm commitments and
 highly probable forecasted transactions. The information on derivative
 instruments is as follows:
 a) Forward exchange contracts outstanding as at year end:
 (vii) The Members of the Company had approved the Scheme of Arrangement
 on 24th March, 2014 between its subsidiary Wimco Limited ('Wimco') and
 the Company and their respective shareholders under Sections 391 and
 394 read with Sections 78, 80, 100 and other applicable provisions of
 the Companies Act, 1956 for demerger of the Non-Engineering Business
 including Safety Matches and Agri (Forestry) Business of Wimco to the
 Company on a going concern basis with effect from 1st April, 2013.
 The Hon'ble High Courts at Bombay and Calcutta had sanctioned the
 Scheme on 10th April, 2014 and 14th May, 2014, respectively.  The
 Scheme became effective on 27th June, 2014 on filing of the Order of
 the Hon'ble High Court with the respective Registrars of Companies.
 Consequent to such filing, Scheme has been given effect to, in the
 financial statements during the financial year ended 31st March, 2015.
 Pavan Poplar Limited and Prag Agro Farm Limited engaged in the business
 of agro-forestry and other related activities, have become direct
 subsidiaries of the Company with effect from 27th June, 2014,
 consequent upon the Scheme becoming effective.
 The accounting of this Arrangement was done as per the Scheme and the
 same has been given effect to in the financial statements as under:
 a) the assets and liabilities of the Non-Engineering business of Wimco
 as at 1st April, 2013 have been taken over at their book values subject
 to adjustments as specified in the Scheme.
 b) cancellation of the carrying amount of the Company's investment in
 Equity amounting to Rs. 113.19 Crores and Preference Shares amounting to
 Rs. 50.00 Crores of Wimco to the extent attributable to the
 Non-Engineering business of Wimco.
 c) in consideration of the above, the Company issued and allotted
 87,761 Ordinary Shares of Rs. 1.00 each as fully paid-up to the
 shareholders of Wimco in the ratio of 2 Ordinary Shares of Rs. 1.00 each
 of the Company for every 77 Equity Shares of Rs. 1.00 each of Wimco.
 d) the excess of the value of the net assets of the Non-Engineering
 business of Wimco over the sum of face value of the shares allotted and
 cancellation of the Company's investment in Wimco, amounting to Rs. 91.00
 Crores was debited to General Reserve.  Further, earlier unrecognised
 net deferred tax assets of Rs. 45.84 Crores on carry forward of business
 losses and other net timing differences of Wimco have been recognised
 as an adjustment to revenue reserves.
 Further, the loss of Rs. 8.01 Crores for the year from 1st April, 2013
 (the appointed date) to 31st March, 2014 has been recognised as an
 adjustment to the revenue reserves.
 The results for the financial year ended 31st March, 2015 reflect the
 effect of the Scheme. Consequently, the figures for the current year
 are not strictly comparable.
 (viii) Pursuant to the enactment of the Companies Act 2013, (the 'Act'),
 the Company has, effective 1st April 2014, reviewed and revised the
 estimated useful lives of its fixed assets, in accordance with the
 provisions of Schedule II of the Act. In respect of assets, whose
 useful life is exhausted as at 1st April, 2014, the related carrying
 amount aggregating to Rs. 48.32 Crores (net of deferred tax of Rs. 24.88
 Crores) has been adjusted against opening balance of Surplus in the
 Statement of Profit and Loss. The consequential impact on the
 depreciation charged to the Statement of Profit and Loss during the
 year on account of the aforesaid change in useful lives is not
 (ix) a) Details of Opening and Closing Stock of Finished Goods
 (manufactured) and Stock-in-Trade (goods purchased for resale)
 (x) Liability for earlier years towards Rates and Taxes and
 Interest thereon of Rs. 157.91 Crores and Rs. 34.77 Crores respectively
 have been written back as no longer required during the financial year
 ended 31st March, 2014, based on a favourable High Court Order (Refer
 Notes 27 and 28). Segment Results of FMCG-Cigarettes and Finance Costs
 include the effects of such write back (Refer Note 32) during the
 financial year ended 31st March, 2014.
 (xi) Information regarding Employee Stock Option Scheme :
 1) Method used to account for share-based payment plans :
 The employee compensation cost has been calculated using the intrinsic
 value method of accounting for Options issued under the Company's
 Employee Stock Option Schemes. The employee compensation cost as per
 the intrinsic value method for the financial year 2014-15 is Nil.
 2) Nature and extent of employee share based payment plans that existed
 during the period including the general terms and conditions of each
 plan :
 Each Option entitles the holder thereof to apply for and be allotted
 ten Ordinary Shares of the Company of Rs. 1.00 each upon payment of the
 exercise price during the exercise period. The exercise period
 commences from the date of vesting of the Options and expires at the
 end of five years from (i) the date of grant in respect of Options
 granted under the ITC Employee Stock Option Scheme (introduced in 2001)
 and (ii) the date of vesting in respect of Options granted under the
 ITC Employee Stock Option Scheme - 2006 & the ITC Employee Stock Option
 Scheme - 2010.
 The vesting period for conversion of Options is as follows:
 - On completion of 12 months from the date of grant of the Options :
 30% vests
 - On completion of 24 months from the date of grant of the Options :
 30% vests
 - On completion of 36 months from the date of grant of the Options :
 40% vests
 The Company granted 68,26,355 Options during 2014-15 (2014 - 67,90,925)
 to the eligible employees of the Company and some of its subsidiary
 The Pricing Formula, as approved by the Shareholders of the Company, is
 such price which is no lower than the closing price of the Company's
 Share on the National Stock Exchange of India Limited ('the NSE') on
 the date of grant, or the average price of the Company's Share in the
 six months preceding the date of grant based on the daily closing price
 on the NSE, or the 'Market Price' as defined from time to time under
 the erstwhile Securities and Exchange Board of India (Employee Stock
 Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, as
 determined by the Nomination & Compensation Committee.
 The Options have been granted at 'market price' as defined from time to
 time under the aforesaid Guidelines.
 In the financial year 2014-15, Options were granted at Rs. 3572.00 per
 4) The Options were exercised throughout the year and weighted average
 share price of Shares arising upon exercise of Options, based on the
 closing market price on NSE on the date of exercise of Options (i.e.
 the date of allotment of shares by the Securityholders Relationship
 Committee) for the year ended 31st March, 2015 was Rs. 357.59 (31st
 March, 2014 - Rs. 333.70).
 7) The volatility used in the Black Scholes Option Pricing model is the
 annualised standard deviation of the continuously compounded rates of
 return on the stock over a period of time. The period considered for
 the working is commensurate with the expected life of the options and
 is based on the daily volatility of the Company's stock price on NSE.
 8) Difference between the employee compensation cost so computed at (1)
 above and the employee compensation cost that shall have been
 recognised if it had used the fair value of the Options.
 Rs. 529.44 crores
 (xii) Previous year's figures have been regrouped/reclassified wherever
 necessary to correspond with the current year's classification/
 2. Related Party Disclosures
 a) Srinivasa Resorts Limited
 b) Fortune Park Hotels Limited
 c) Bay Islands Hotels Limited
 d) WelcomHotels Lanka (Private) Limited, Sri Lanka
 e) Landbase India Limited
 f) Russell Credit Limited and its subsidiary
 Greenacre Holdings Limited
 g) Technico Pty Limited, Australia and its subsidiaries
 Technico Agri Sciences Limited
 Technico Technologies Inc., Canada
 Technico Asia Holdings Pty Limited, Australia and its subsidiary
 Technico Horticultural (Kunming) Co. Limited, China h) Wimco Limited i)
 Pavan Poplar Limited 1 j) Prag Agro Farm Limited 1 k) ITC Infotech
 India Limited and its subsidiaries
 ITC Infotech Limited, UK
 ITC Infotech (USA), Inc. and its subsidiary Pyxis Solutions, LLC, USA
 l) Wills Corporation Limited m) Gold Flake Corporation Limited n) ITC
 Investments & Holdings Limited and its subsidiary
 MRR Trading & Investment Company Limited (w.e.f. 30.03.2015) o) Surya
 Nepal Private Limited p) King Maker Marketing, Inc., USA q) BFIL
 Finance Limited and its subsidiary
 MRR Trading & Investment Company Limited (upto 29.03.2015) r) North
 East Nutrients Private Limited The above list does not include ITC
 Global Holdings Pte. Limited, Singapore (in liquidation)
 1 Pursuant to the Scheme of Arrangement [Refer Note 31(x)]
 ii) Other entities under control of the Company:
 a) ITC Sangeet Research Academy
 b) ITC Education Trust
 c) ITC Rural Development Trust
 Associates & Joint Ventures:
 a) Gujarat Hotels Limited
 b) International Travel House Limited
 - being associates of the Company, and
 c) Tobacco Manufacturers (India) Limited, UK
 - of which the Company is an associate.
 Associates of the Company's subsidiaries
 a) Russell Investments Limited
 b) Classic Infrastructure & Development Limited
 c) Divya Management Limited
 d) Antrang Finance Limited
 - being associates of Russell Credit Limited, and
 e) ATC Limited
 - being associate of Gold Flake Corporation Limited
 Joint Ventures
 a) Maharaja Heritage Resorts Limited
 b) Espirit Hotels Private Limited
 c) Logix Developers Private Limited
 Joint Venture of the Company's subsidiary
 a) ITC Essentra Limited
 - being joint venture of Gold Flake Corporation Limited
 ii) a) Key Management Personnel:
 Y. C. Deveshwar Executive Chairman
 N. Anand Executive Director
 P. V. Dhobale Executive Director
 K. N. Grant Executive Director
 A. Baijal2 Non-Executive Director
 S. Banerjee1 Non-Executive Director (w.e.f. 24.07.2014)
 A. Duggal2 Non-Executive Director (w.e.f. 15.09.2014)
 S. H. Khan2 Non-Executive Director
 A. V. Girija Kumar Non-Executive Director
 R. Lerwill Non-Executive Director
 S. B. Mainak Non-Executive Director (w.e.f. 25.04.2014)
 S. B. Mathur2 Non-Executive Director
 P. B. Ramanujam2 Non-Executive Director
 S. S. H. Rehman2 Non-Executive Director
 A. Ruys Non-Executive Director (ceased w.e.f. 24.07.2014) M. Shankar2
 Non-Executive Director
 K. Vaidyanath Non-Executive Director
 1 Appointed as Independent Director w.e.f. 30.07.2014
 2 Appointed as Independent Director w.e.f. 15.09.2014
 Members - Corporate Management Committee
 B. B. Chatterjee A. Nayak
 S. Puri (w.e.f. 01.11.2014) T. V. Ramaswamy S. Sivakumar K. S. Suresh
 R. Tandon
 b) Relatives of Key Management Personnel:
 Mrs. B. Deveshwar (wife of Mr. Y. C. Deveshwar) Mrs. S. Chatterjee
 (wife of Mr. B. B. Chatterjee) Mrs. S. Rehman (wife of Mr. S. S. H.
 iii) Employee Trusts where there is significant influence:
 a) IATC Provident Fund
 b) IATC Staff X Provident Fund (merged with IATC Provident Fund w.e.f.
 c) ITC Defined Contribution Pension Fund
 d) ITC Management Staff Gratuity Fund
 e) ITC Employees Gratuity Fund
 f) ITC Gratuity Fund 'C'
 g) ITC Pension Fund
 h) ILTD Seasonal Employees Pension Fund
 i) ITC Platinum Jubilee Pension Fund
 j) Tribeni Tissues Limited Gratuity Fund
 k) ITC Bhadrachalam Paperboards Limited Management Staff Pension Fund
 l) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'A'
 m) ITC Bhadrachalam Paperboards Limited Gratuity Fund 'C'
 n) ITC Hotels Limited Employees Superannuation Scheme
Source : Dion Global Solutions Limited
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