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Mahindra and Mahindra
BSE: 500520|NSE: M&M|ISIN: INE101A01026|SECTOR: Auto - Cars & Jeeps
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Mar 12
Notes to Accounts Year End : Mar '13
1.  Interest capitalised during the year to capital work-in-progress
 Rs. 8.24 crores (2012 : Rs. 2.89 crores).
 
 2.  Employee Benefits :
 
 General description of defined benefit plans :
 
 Gratuity
 
 The Company operates a gratuity plan covering qualifying employees. The
 benefit payable is the greater of the amount calculated as per the
 Payment of Gratuity Act or the Company scheme applicable to the
 employee. The benefit vests upon completion of five years of continuous
 service and once vested it is payable to employees on retirement or on
 termination of employment. In case of death while in service, the
 gratuity is payable irrespective of vesting. The Company makes annual
 contribution to the group gratuity scheme administered by the Life
 Insurance Corporation of India through its Gratuity Trust Fund.
 
 Post retirement medical
 
 The Company provides post retirement medical cover to select grade of
 employees to cover the retiring employee and their spouse upto a
 specified age through mediclaim policy on which the premiums are paid
 by the Company. The eligibility of the employee for the benefit as well
 as the amount of medical cover purchased is determined by the grade of
 the employee at the time of retirement.
 
 Post retirement housing allowance
 
 The Company operates a post retirement benefit scheme for a certain
 grade of employees in which a monthly allowance determined on the basis
 of the last drawn basic salary at the time of retirement, is paid to
 the retiring employee in lieu of housing.
 
 3.  Provisions :
 
 (a) Provision for warranties relate to warranty provision made in
 respect of sale of certain products, the estimated cost of which is
 accrued at the time of sale. The products are generally covered under a
 free warranty period ranging from 6 months to 3 years.
 
 (b) The movement in provisions for warranty is as follows :
 
 4.  The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs.
 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each and
 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each in the years ended
 31st March, 2002, 31st March, 2010 and 31st March, 2011 respectively to
 the Mahindra & Mahindra Employees'' Stock Option Trust set up by the
 Company. The trust holds these shares for the benefit of the employees
 and issues them to the eligible employees as per the recommendation of
 the Compensation Committee.
 
 Options granted under Mahindra & Mahindra Limited Employees Stock
 Option Scheme - 2000 (2000 Scheme) vest in 4 equal installments on
 the expiry of 12 Months, 24 Months, 36 Months and 48 Months from the
 date of grant. The options may be exercised on any day over a period of
 five years from the date of vesting. Number of vested options
 exercisable is subject to a minimum of 50 or number of options vested
 whichever is lower.
 
 Options granted under Mahindra & Mahindra Limited Employees Stock
 Option Scheme - 2010 (2010 Scheme) vest in 5 equal installments on
 the expiry of 12 Months, 24 Months, 36 Months, 48 Months and 60 Months
 from the date of grant. The options may be exercised on any day over a
 period of 6 Months from the date of vesting. Number of vested options
 exercisable is subject to a minimum of 50 or number of options vested
 whichever is lower.
 
 5.  Contingent Liability & Commitments :
 
 (A) Contingent Liability :
 
 (a) Guarantees given by the Company :
 
                                                      Rupees crores
 
                  Amount of guarantees   Outstanding amounts against
                                         guarantees
                   2013       2012        2013           2012
 
 For other
 companies        87.20     171.98       80.35         166.83
 
 (b) Claims against the Company not acknowledged as debts comprise of :
 
 (i) Excise Duty, Sales Tax and Service Tax claims disputed by the
 Company relating to issues of applicability and classification
 aggregating Rs. 1,526.09 crores before tax (2012 : Rs. 1,464.96 crores
 before tax).
 
 (ii) Other matters (excluding claims where amounts are not
 ascertainable) : Rs. 26.94 crores before tax (2012 : Rs. 21.36 crores
 before tax).
 
 (c) Taxation matters :
 
 (i) Demands against the Company not acknowledged as debts and not
 provided for, relating to issues of deductibility and taxability in
 respect of which the Company is in appeal and exclusive of the effect
 of similar matters in respect of assessments remaining to be completed:
 
 - Income-tax : Rs. 195.74 crores (2012 : Rs. 319.29 crores).
 
 (ii) Items in respect of which the Company has succeeded in appeal, but
 the Income-tax Department is pursuing/likely to pursue in
 appeal/reference and exclusive of the effect of similar matters in
 respect of assessments remaining to be completed :
 
 - Income-tax matters : Rs. 118.75 crores (2012 : Rs. 70.98 crores).
 
 - Surtax matters : Rs. 0.13 crores (2012 : Rs. 0.13 crores).
 
 (d) Bills discounted not matured Rs. 57.56 crores (2012 : Rs. Nil).
 
 (e) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by
 its order dated 7th December, 2009 has rejected the Company''s appeal
 against the order dated 30th March, 2005 passed by the Commissioner of
 Central Excise (Adjudication), Navi Mumbai confirming the demand made
 on the Company for payment of differential excise duty (including
 penalty) of Rs. 304.10 crores in connection with the classification of
 Company''s Commander range of vehicles, during the years 1991 to 1996.
 Whilst the Company had classified the Commander range of vehicles as
 10-seater attracting a lower rate of excise duty, the Commissioner of
 Central Excise (Adjudication), Navi Mumbai, has held that these
 vehicles could not be classified as 10-seater as they did not fulfil
 the requirement of 10-seater vehicles, as provided under the Motor
 Vehicles Act, 1988 (MVA) and Maharashtra Motor Vehicles Rules, 1989
 (MMVR) and as such attracted a higher rate of excise duty.
 
 In earlier collateral proceedings on this issue, the CESTAT had by an
 order dated 19th July, 2005 settled the controversy in the Company''s
 favour. The CESTAT had accepted the Company''s submission that MVA and
 MMVR could not be referred to for determining the classification for
 the purpose of levy of excise duty and rejected the Department''s appeal
 against the order of the Collector, Central Excise classifying the
 Commander range of vehicles as 10-seater. While the Department''s appeal
 against the CESTAT order dated 19th July, 2005 has been admitted, the
 Supreme Court of India has not stayed the operation of this order.
 
 The Company has filed an appeal in the Supreme Court against the
 aforesaid order dated 7th December, 2009 inter alia, on the grounds
 that the MVA and MMVR cannot be referred to for the purpose of
 determining the excise classification, as has been repeatedly held by
 various judicial fora, including the Supreme Court and particularly by
 CESTAT vide its order dated 19th July, 2005 in the Company''s own case
 referred to above.
 
 Without prejudice to the grounds raised in this appeal, the Company has
 paid an amount of Rs. 40.00 crores in January, 2010. The Supreme Court
 has admitted the Company''s appeal and has stayed the recovery of the
 balance amount till further orders.
 
 In another case relating to Armada range of vehicles manufactured
 during the years 1992 to 1996, by the Company at its Nashik facility,
 the Commissioner of Central Excise, Nashik passed an order dated 20th
 March, 2006 confirming a demand of Rs. 24.75 crores, on the same
 grounds as adopted for Commander range of vehicles. The CESTAT has
 given an unconditional stay against this order.  The final hearing in
 this matter has been adjourned till the disposal of the appeal by the
 Supreme Court in the matter relating to Commander range of vehicles.
 
 The Company strongly believes, based on legal advice it has received,
 that the CESTAT order dated 7th December, 2009 which is under appeal in
 the Supreme Court is not sustainable in law. As such, the Company does
 not expect any liability on this account. However, in view of the
 CESTAT order, the Company has reflected the above amount aggregating
 Rs. 328.85 crores (2012 : Rs. 328.85 crores) and the interest of Rs.
 269.24 crores (2012 : Rs. 233.13 crores) accrued on the same upto 31st
 March, 2013, under Note (b)(i) above.
 
 (B) Commitments :
 
 (a) Uncalled liability on equity shares partly paid Rs. 10.50 crores
 (2012 : Rs. 10.50 crores).
 
 (b) The estimated amount of contracts remaining to be executed on
 capital account and not provided for as at 31st March, 2013 is Rs.
 716.91 crores (2012 : Rs. 590.44 crores).
 
 35.  Research and Development expenditure :
 
 (a) In recognised Research and Development units :
 
 (i) Debited to the Statement of Profit and Loss, including certain
 expenditure based on allocations made by the Company, aggregate Rs.
 594.43 crores (2012 : Rs. 430.34 crores) [excluding depreciation and
 amortisation of Rs. 191.86 crores (2012 : Rs. 130.32 crores)].
 
 (ii) Development expenditure incurred during the year Rs. 274.02 crores
 (2012 : Rs. 257.47 crores).
 
 (iii) Capitalisation of assets Rs. 190.54 crores (2012 : Rs. 209.99
 crores).
 
 (b) In other units :
 
 (i) Debited to the Statement of Profit and Loss, including certain
 expenditure based on allocations made by the Company, aggregate Rs.
 16.33 crores (2012 : Rs. 30.49 crores) [excluding depreciation and
 amortisation of Rs. 6.91 crores (2012 : Rs. 6.41 crores)].
 
 (ii) Development expenditure incurred during the year Rs. Nil (2012 :
 Rs. 0.04 crores).
 
 (iii) Capitalisation of assets Rs. 0.34 crores (2012 : Rs. 4.12
 crores).
 
 6.  The net difference in foreign exchange loss debited to the
 Statement of Profit and Loss is Rs. 6.99 crores (2012 : gain of Rs.
 16.31 crores).
 
 7.  Scheme of Arrangement :
 
 Pursuant to the Scheme of Arrangement (the Scheme) as approved by the
 shareholders of the Company and subsequently sanctioned by Honourable
 High Court of Bombay vide its order dated 30th March, 2012, the entire
 assets and liabilities, duties and obligations of the Automotive
 business of Mahindra Automobile Distributor Private Limited (MADPL) was
 transferred to and vested in the Company, from 1st April, 2011 (the
 appointed date). The Scheme became effective on 23rd April, 2012. The
 Scheme has been given effect to in the financial statements for the
 year ended 31st March, 2012.
 
 As a result, in the financial statements as at, and for the year ended
 31st March, 2012 :
 
 (a) The debit balance in the Statement of Profit and Loss of Automotive
 business of MADPL of Rs. 207.52 crores was transferred to General
 Reserve.
 
 (b) The excess of the value of the net liabilities of the Automotive
 business of MADPL, over the face value of the 5,917 Ordinary (Equity)
 shares allotted, amounting to Rs. 1.37 crores was debited to Capital
 Reserve. The shares were allotted in May 2012.
 
 (c) Replenished the Investment Fluctuation Reserve to the extent of Rs.
 113.93 crores (based on the charge to Investment Fluctuation Reserve
 taken in earlier years on the investment by the Company in MADPL).
 
 (d) Provided Rs. 95.24 crores for depreciation for the years 2010 and
 2011 not provided by MADPL in its financial statements.
 
 (e) Transferred Rs. 108.27 crores to the Statement of Profit and Loss
 and disclosed the same as an exceptional item.
 
 The result for the year ended 31st March, 2012 also include a tax
 saving of Rs. 148.53 crores arising from the carry forward unabsorbed
 past losses and deferred tax positions of the Automotive business of
 MADPL.
 
 8.  Exceptional item of Rs. 90.62 crores (2012 : Rs. 108.27 crores)
 comprise :
 
 (a) Profit on sale of certain long term investments Rs. 90.62 crores
 (2012 : Rs. Nil).
 
 (b) Reversal of Impairment loss taken over, as per the Scheme of
 Arrangement Rs. Nil (2012 : Rs. 108.27 crores).
 
 9. The outstanding derivative instruments and unhedged foreign
 currency exposures as on 31st March, 2013 :
 
 The Company has taken foreign exchange contracts to sell US $ 24.00
 crores (2012 : US $ 13.00 crores) comprising Forward Contracts US $
 24.00 crores (2012 : US $ 11.40 crores), Plain Vanilla Put Options US $
 Nil (2012 : US $ 0.70 crores) and derivative structures in the form of
 ''strips'' - US $ Nil (2012 : US $ 0.90 crores).
 
 The foreign currency exposures not hedged by derivative instruments or
 otherwise as on 31st March, 2013 are - Receivables of ZAR 3.80 crores,
 US $ 2.81 crores, AUD 0.80 crores, GBP 0.24 crores, AED 0.02 crores and
 Payables (excluding Borrowings, covered in the paragraph below) of JPY
 4.83 crores, EUR 1.20 crores, SEK 0.06 crores, CHF * crores, SGD *
 crores (2012 : ZAR 5.88 crores, US $ 3.42 crores, AUD 0.49 crores, GBP
 0.35 crores, AED 0.05 crores and Payables of JPY 5.43 crores, EUR 0.64
 crores, RMB 0.15 crores, SEK 0.04 crores, CHF * crores, SGD * crores).
 
 In addition the Company has outstanding foreign currency borrowings of
 JPY 388.20 crores and US $ 30.00 crores (2012 : JPY 994.21 crores and
 US $ 30.00 crores). The borrowing of JPY 388.20 crores (2012 : JPY
 582.30 crores) has been fixed to US $ 3.33 crores using a cross
 currency swap and the borrowing of JPY Nil (2012 : JPY 411.91 crores)
 has been fixed to INR liability using a cross currency swap. Currency
 risk of US $ liability has not been hedged. The US $ interest rate risk
 has been hedged using an interest rate swap. Company has also availed
 Packing Credit amounting to US $ 1.00 crore (2012 : US $ Nil) during
 the year, the same has been hedged by taking forward cover of US $ 1.00
 crore (2012 : US $ Nil).
 
 During the financial year ended 31st March, 2011, the Company had
 subscribed to bonds issued by Ssangyong Motor Company amounting to KRW
 9,540.48 crores. The Company has hedged the foreign currency risk of
 the bond (including interest) using suitable forwards.
 
 * denotes amounts less than 50,000 of respective currency
 
 10. Previous year''s figures have been regrouped/restated wherever
 necessary.
Source : Dion Global Solutions Limited
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