M/s Kavveri Telecom Products Limited (''Company'' or ''Kavveri'') was
incorporated in 1996 and is engaged in the design, development and
manufacture of Radio Frequency products and antennae for telecom,
defense and space applications in India and abroad. Kavveri enjoys the
status of being the largest manufacturer of Wireless subsystem Products
like, Radio Frequency products and antenna and Radio Frequency products
in India. Kavveri also provides total turnkey solutions for coverage
and capacity enhancement requirements for GSM 3G and CDMA carriers in
2. Basis of Preparation of Financial Statements:
The financial statements have been prepared to comply in all material
respects with the notified Accounting Standards by Companies Accounting
Standards Rules, 2006 and the relevant provisions of the Companies Act,
1956. The financial statements have been prepared under the historical
cost convention on an accrual basis in accordance with accounting
principles generally accepted in India. The accounting policies have
been consistently applied by the Company and are consistent with those
used in the previous year and in case of any such variation in the
accounting policy as compared to the previous year; such variations are
disclosed separately as a part of notes to accounts.
3. Change in Accounting Policy
During the year ended March 31,2012, the revised Schedule VI notified
under the Companies Act, 1956, has become applicable to the Company,
for preparation and presentation of its financials. The adaptation of
revised Schedule VI does not impact recognition and measurement
principles followed by the Company for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
4. Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of the operations during the
reporting period. Although these estimates are based upon management''s
best knowledge of current events and actions, actual results could
differ from these estimates.
5. Tangigble and Intangible Fixed Assets:
Tangible Fixed Assets
- Fixed Assets are stated at cost of acquisition (Net of Cenvat and
VAT) plus subsequent improvements thereto including taxes, duties,
freight and other incidental expenses related to acquisition and
installation including finance charges which are directly attributable
to the Fixed assets less accumulated depreciation and impairment loss.
- Capital Work in Progress comprises of the cost of fixed assets that
are not put to use as at the Balance Sheet date and relevant financial
charges incurred thereon.
Intangible Fixed Assets:
- Technical knowhow acquired to be used to upgrade and develop new
products and used for enhancement of features & functionalities of the
products are capitalized under Fixed asset as Technical Knowhow.
- Software which are not integral part of the hardware are classified
as Intangibles and is stated at cost less accumulated amortization.
Software''s are being amortized over the estimated useful life which is
estimated as 3 Years.
- Depreciation on tangible Fixed Assets is provided using
Straight-line method at the rates prescribed under Schedule XIV of the
companies Act, 1956 on proportionate basis.
- Cost of Technical knowhow is being written off over a period of 10
- Cost of assets wherever less than Rs. 5000 is written off fully in
the year of purchase.
- Temporary structures installed at the leased out premises is being
written off over the tenure of the lease agreement.
7. Impairment of tangible and intangible Fixed Assets:
The Company assesses at each Balance Sheet date, whether there is any
indication that an asset may be impaired based on internal/external
factors. If any such indication exists, the Company estimates the
recoverable amount of the asset. An impairment loss is recognized
wherever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the asset''s net
selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at
the weighted average cost of capital.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
9. Inventory Valuation:
Raw Materials, Stores and spares and Stock in Trade are stated at lower
of cost and net realizable value. Cost is determined based on first in
first out basis and are net of provisions.
Work in Progress and Finished Goods are valued at lower of cost and net
realizable value. Cost includes Direct Materials and labour and a
proportion of manufacturing overheads based on normal operating
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and selling
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long term investments. Long term
investments are carried at cost. However, provision for diminution in
value is made to recognize a diminution other than temporary in the
value of investments.
11. Research and Development:
Expenditure on Research and Development other than capital items is
charged to revenue. Cost incurred on any generation of
intangible/tangible asset out of the Research and development activity
is amortized/written off over the estimated life of the asset.
12. Revenue Recognition:
- Sales are recognized when the significant risks attached to the
goods are passed on to the buyer and are recorded net of duties, trade
discounts, and rebates.
- Sales Returns are recognized as and when ascertained and are
reduced from the sales turnover of the year.
- Interest income is recognized on a time proportion basis taking
into account the amount outstanding and the rate applicable.
- Export benefits are accounted on accrual basis.
13. Warranty Expenses:
Estimated amount of warranty expenses evaluated on a technical basis on
sale of Radio Products wherever it is obligated to cover under
warranty, is provided in the year of sale and the expired portion of
the Warranty expenses relating to the period/year are transferred to
the Statement of Profit and Loss. Unexpired portion of the Warranty
expenses is carried over as a liability in the books of account and is
written back over the number of years of the coverage of warranty on
the basis of estimated warranty expenses for such products.
14. Exchange Fluctuation:
a. Foreign currency transactions are accounted at exchange rates
prevailing on the date of the transaction.
b. Gains and losses resulting from the settlement of foreign currency
transaction and from the translation of monetary assets and liabilities
denominated in foreign currencies at the yearend rates are recognized
in the Statement of Profit and Loss.
c. In case the monetary assets and liabilities are covered by forward
contract, the premium or discount arising at the inception of such a
forward contract is amortized as expense or income over the life of the
15. Employee Benefits:
- Provident Fund: Eligible employees receive benefits from a
Provident Fund, which is a defined contribution plan. Aggregate
contributions along with interest thereon, are paid at retirement,
death, incapacitation or termination of employment. Both the employee
and the Company make monthly contributions to the Government
administered Provident Fund. The Company has no obligation beyond its
- Gratuity: A defined benefit retirement plan (''the Gratuity Plan)
is provided to all employees. In accordance with the Payment of
Gratuity Act, 1972, the Gratuity Plan provides a lump sum amount to
vested employees at retirement, death, incapacitation or termination of
employment, of an amount based on the respective employee''s salary and
the tenure of employment. Liabilities with regard to the Gratuity plan
are determined by actuarial valuation using the projected unit credit
method, as of the balance sheet date.
- Expenses on ex-gratia payment to employees, a defined contribution
plan, are accounted as and when accepted by the management.
- Provision in respect of Leave encashment is made, based on
16. Borrowing Cost:
Borrowing costs relating to acquisition of qualifying assets are
capitalized until the time all substantial activities necessary to
prepare the qualifying assets for their intended use are complete. A
qualifying asset is one that necessarily takes substantial period of
time to get ready for its intended use. All other borrowing costs not
eligible for capitalization are charged to revenue.
- Tax expense comprises of current and deferred tax. Current Income
Tax is measured based on the tax liability computed after considering
tax allowances and exemptions.
- Deferred tax is recognized, subject to the consideration of
prudence in respect of deferred tax assets, on timing differences,
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
- Deferred Tax assets are recognized only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
18. Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and items income or expense associated with
investing or financing cash flows. Cash and Cash Equivalents include
Cash on hand and balance with banks in current and deposit accounts,
with necessary disclosure of cash and cash equivalent balances that are
not available for use by the company.
Cash and Cash Equivalents for the purpose of Cash Flow Statement
comprise of cash at Bank and in hand and Short Term investments with
original maturity of 3 months or less.
19. Stock Option Plan (2008):
The Company instituted the Kavveri ESOS 2008 Plan for all eligible
employees in pursuance of the special resolution approved by the
shareholders by Postal ballot on 23rd April 2008. The Kavveri ESOS 2008
Plan covers all employees of the company and its subsidiaries and
Directors (excluding Promoter Directors) of the Company and its
subsidiaries (collectively, eligible employees). Under the Scheme,
the Compensation Committee of the Board (''the Committee'') shall
administer the Scheme and grant stock options to eligible directors and
employees of the Company and its Subsidiaries. The Committee shall
determine the employees eligible for receiving the options, the number
of options to be granted, the exercise price, the vesting period and
exercise period. Vesting of employee stock options granted occurs in
tranches as under:
The exercise price for the purpose of exercise of options will be at
Rs.10/- per share i.e. at par.
The employee stock options granted shall be capable of being exercised
within a period of 5 years from the date of vesting options or such
lesser period as may be decided by the Compensation Committee from time
Under the Scheme 388570(139125) stock options out of the total of
5,00,000 stock options reserved for grant of options having an exercise
price equal to the par value of the underlying equity shares on the
date of grant (i.e. Rs. 10 per option) are outstanding as at the
balance sheet date.
As the number of shares that an individual employee is entitled to
receive and the price of the options are known at the grant date, the
scheme is considered as a fixed grant.
In the case of termination of employment, all non-vested options would
stand cancelled. Options that have been vested but have not been
exercised can be exercised within the time prescribed under each option
agreement by the Committee or if no time limit is prescribed, within 30
days of the date of employment termination, failing which they would
The Company follows intrinsic method of accounting based on which the
compensation cost is recognized in the Profit and Loss account.
During the current year, the company under the Kavveri 2008 Plan has
granted 384,000 (Nil) options to eligible employees and 23,595 options
lapsed till 31st March 2012.
20. Earnings per share:
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. The
weighted average number of shares outstanding during the year is
adjusted for events of bonus issue.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
21. Investments in Subsidiary Companies:
a. Pursuant to the Scheme of Amalgamation as referred to in Note 1
above, Eaicom India Private Limited (EIPL, erstwhile 100% subsidiary
company of Megasonic Telecoms Private Limited has become a wholly owned
subsidiary of the Company.
b. The Company incorporated a 100% subsidiary in the name of KAVVERI
TECHNOLOGIES INC at Canada during the financial year 2005-06 with an
initial investment of 292,000 CAD Dollars. Additional investment of CAD
2,015,000/-was made during the year 2007-08 in the aforesaid subsidiary
by partial conversion of the loan granted to the subsidiary.
c. The Company incorporated a 100% subsidiary in the name of KAVVERI
TELECOM PRODUCTS UK Limited at UK during the financial year 2009-10
with no initial cost of investment.
d. The Company has incorporated a 100% subsidiary in the name of
KAVVERI TELECOM ESPANA during the financial year 2011-12 with 1,003,000
Euros as cost of investment.
22. Contingent Liability:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are not recognized but are disclosed in the
Notes. Contingent assets are neither recognized nor disclosed in the