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Mahindra and Mahindra

BSE: 500520|NSE: M&M|ISIN: INE101A01026|SECTOR: Auto - Cars & Jeeps
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« Mar 15
Notes to Accounts Year End : Mar '16
The above monies which are treated as advance received from the Trust,
 is included under Other Current Liabilities and Other Long Term
 Liabilities.
 
 (a) Term loans from banks comprise of :
 
 USD External Commercial Borrowings carrying an average margin of 142
 basis points over three month USD Libor and are repayable after five
 years and one day from the date of respective availment of loan. Rs.
 662.55 crores payable in August, 2016 and Rs. 331.28 crores payable in
 September, 2016 are shown under current maturities of long term
 borrowings.
 
 Fixed deposits are repayable three years from the date of deposit and
 carry an interest rate of 9.75%. Rs. 21.36 crores is shown under
 current maturities of long term borrowings.
 
 (a) Long Term Loans and Advances to Related Parties includes :
 
 (i) Share Application Money pending allotment Rs. Nil crores (2015 :
 Rs. 55.00 crores) to subsidiaries,
 
 (ii) Loans to Subsidiary company Rs. 1,200.00 crores (2015 : Rs. Nil
 crores).
 
 (iii) Capital Advances of Rs. Nil crores (2015 : Rs. 4.49 crores).  
 
 (iv) Loan to a Director of Rs. 5.80 crores (2015 : Rs. 1.09 crores).
 
 (b) Other Loans and Advances includes :
 
 (i) Payment towards income-tax and surtax Rs. 465.45 crores (2015 : Rs.
 457.72 crores).
 
 (ii) MAT Credit entitlement Rs. 718.89 crores (2015 : Rs. 666.87
 crores).
 
 (iii) VAT receivable, other recoverable expenses, prepaid expenses and
 advances to employees.
 
 (c) Loans given to employees as per the Company''s policy are not
 considered for the purposes of disclosure under Section 186(4) of the
 Companies Act, 2013.
 
 The above includes amounts paid/payable for professional services
 rendered by firm in which some of the partners of the statutory
 auditors'' firm are partners Rs. 0.51 crores (2015: Rs. 0.32 crores)
 
 Current year figures are in bold
 
 * denotes amounts less than Rs. 50,000.
 
 (d) Other expenses includes expenditure incurred on Corporate Social
 Responsibility (CSR) under section 135 of the Companies Act, 2013 Rs.
 85.90 crores (2015 Rs. 83.24 crores).
 
 1.  Interest capitalised during the year on qualifying assets Rs.
 35.25 crores (2015 : Rs. 26.12 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.
 
 The expected rate of return on plan assets is based on the average long
 term rate of return expected on investments of the fund during the
 estimated term of obligation.
 
 The estimate of future salary increases, considered in actuarial
 valuation, takes account of inflation, seniority, promotion and other
 relevant factors, such as supply and demand in the employment market.
 
 The Company''s contribution to Provident Fund and Superannuation Fund
 aggregating Rs. 119.23 crores (2015 : Rs. 115.12 crores) has been
 recognised in the Statement of Profit and Loss under the head Employee
 Benefits Expense.
 
 3.  Provision :
 
 (a) Provision for warranty relates 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 5 years.
 
 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, 1,73,53,034
 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity)
 Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5
 each in the years ended 31st March, 2002, 31st March, 2010, 31st March,
 2011, 31st March, 2014 and 31st March, 2015 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
 
 i) 5 equal instalments on the expiry of 12 Months, 24 Months, 36
 Months, 48 Months and 60 Months from the date of grant or 
 
 ii) 4 instalments bifurcated as 20% on the expiry of 18 months, 20% on
 the expiry of 30 months, 30% on the expiry of 42 months and 30% on the
 expiry of 54 months.  The options may be exercised on any day over a
 period of 5 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.
 
 The compensation costs of stock options granted to employees are
 accounted by the Company using the intrinsic value method.
 
 In respect of Options granted under the Employee Stock Option Plan, in
 accordance with guidelines issued by SEBI, the accounting value of the
 options is accounted as deferred employee compensation, which is
 amortised on a straight line basis over the period between the date of
 grant of options and eligible dates for conversion into equity shares.
 Consequently, salaries, wages, bonus etc. includes Rs. 88.37 crores
 (2015 : Rs. 35.07 crores) being the amortisation of deferred employee
 compensation, after adjusting for reversals on account of options
 lapsed. The amount excludes Rs. 5.26 crores (2015 : Rs. 2.68 crores)
 charged to its subsidiaries for options issued to their employees.
 
 Had the Company adopted fair value method in respect of options granted
 on or after 1st April, 2005, the employee compensation cost would have
 been lower by Rs. 5.01 crores. Profit aftertax higher by Rs. 5.01
 crores and the basic and diluted earnings per share would have been
 higher by Rs. 0.08 and Rs. 0.08 respectively.
 
 (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. 564.56 crores (2015 : Rs. 526.49 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. 112.30 crores (2015 : Rs. 153.65 crores).
 
 - Surtax matters : Rs. 0.13 crores (2015 : Rs. 0.13 crores).
 
 (d) 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) read with Maharashtra Motor Vehicles Rules,
 1989 (MMVR) and as such attracted a higher rate of excise duty. The
 Company has challenged the CESTAT order in the Supreme Court.
 
 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. The Department had challenged
 the CESTAT order in the Supreme Court.
 
 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.  Both these orders of the Tribunals
 were heard and disposed off by the Honourable Supreme Court, in August
 2014. Since contrary views were expressed by the Tribunals in two
 parallel proceedings, the Honourable Supreme Court directed that a
 larger bench of the Tribunal be constituted to hear the appeals without
 expressing any opinion on the issues.  The Larger Bench of the CESTAT
 heard the matter in February, 2015 and by an order dated 27 February,
 2015, remanded the matter to the Commissioner of Central Excise for
 consideration of the case afresh keeping all issues open.  The company
 strongly believes, based on legal advice it has received, that it has a
 good case on merits so as to ultimately succeed in the matter.
 
 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.
 
 As such, the Company does not expect any liability on this account.
 However, in view of the CESTAT orders and subsequent proceedings,
 pending their final outcome, the Company has reflected the above amount
 aggregating Rs. 328.85 crores (2015 : Rs. 328.85 crores) and the
 interest of Rs. 377.64 crores (2015 : Rs. 341.44 crores) accrued on the
 same upto 31st March, 2016, under Note (b)(i) above.
 
 (e) In respect of (b) & (c) above, it is not practicable for the
 Company to estimate the closure of these issues and the consequential
 timings of cash flows, if any.
 
 (B) Commitments :
 
 (a) Uncalled liability on equity shares partly paid Rs. Nil crores
 (2015 : 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, 2016 is Rs.
 924.74 crores (2015 : Rs. 745.08 crores) and other commitment as at
 31st March 2016 is Rs. 8.50 crores (2015: Rs. Nil crores)
 
 5.  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.
 730.93 crores (2015 : Rs. 702.76 crores) [excluding depreciation and
 amortisation of Rs. 287.02 crores (2015 : Rs. 206.98 crores)].
 
 (ii) Development expenditure incurred during the year Rs. 905.41 crores
 (2015 : Rs. 634.25 crores).
 
 (iii) Capitalisation of assets Rs. 104.65 crores (2015 : Rs. 162.29
 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.
 68.27 crores (2015 : Rs. 45.28 crores) [excluding depreciation and
 amortisation of Rs. 9.78 crores (2015 : Rs. 39.77 crores)].
 
 (ii) Development expenditure incurred during the year Rs. 106.22 crores
 (2015 : Rs. 41.64 crores).
 
 (iii) Capitalisation of assets Rs. 22.38 crores (2015 : Rs. 0.91
 crores).
 
 6.  The net difference in foreign exchange loss debited to the
 Statement of Profit and Loss is a loss of Rs. 109.01 crores (2015 : Rs.
 45.99 crores).
 
 7.  The Board of Directors of the Company during the year ended 31st
 March, 2014, approved entering into a transaction in the Auto
 Components business with CIE Automotive S.A., Spain (CIE). The
 transaction was to be completed in parts with the first part being
 completed in the financial year ended 31st March, 2014. During the year
 ended 31st March, 2015, the second (and final) part of the transaction
 involving the merger through a scheme of arrangement of Mahindra Ugine
 Steel Company Limited (MUSCO), Mahindra Gears International Limited
 (MGIL), Mahindra Investments (India) Private Limited (MIIPL), Mahindra
 Hinoday Industries Limited, Mahindra Composites Limited and a CIE
 subsidiary with Mahindra CIE Automotive Limited (MCIE) was approved by
 the High Court of Bombay and became operative from the appointed date
 of 1st October, 2013 and came into effect (effective date) from 10th
 December, 2014. In terms of the scheme the company has received shares
 in MCIE which has been accounted for in accordance with AS 13 -
 Accounting for Investments. Having regard to the substance of the
 transaction, the excess of the fair value of MCIE Shares received and
 carrying cost of investment in MUSCO, MIIPL and MGIL of Rs. 267.47
 crores, has been credited to the Investment Fluctuation Reserve to
 offset the losses recognised in the year ended 31st March, 2015.
 
 8.  During the year ended 31st March, 2015, the Scheme of Arrangement
 (Scheme) between the Company''s subsidiary Mahindra Engineering Services
 Limited (MESL) with Tech Mahindra Limited (TML), an associate of the
 Company, was approved by the High Court of Bombay. The scheme was
 operative from the appointed date of 1st April, 2013 and had come into
 effect (effective date) from 8th December, 2014. Consequently, during
 the year ended 31st March, 2015, MESL along with its subsidiaries
 Mahindra Engineering Services (Europe) Limited, Mahindra Engineering
 GmbH, Mahindra Technologies Services Inc. ceased to be subsidiaries of
 the Company.  In accordance with AS 13 - Accounting for Investments,
 Rs. 299.34 crores, being the excess of fair value of TML shares
 received in terms of the scheme over the carrying cost of investments
 in MESL had been recorded as an exceptional item during the year ended
 31st March, 2015.
 
 Note:
 
 1.  Consequent to the Scheme of Arrangement referred to in Note 37
 transactions entered into from 1st April, 2014 to 9th December, 2014
 with the companies mentioned below, have been disclosed as transactions
 entered into with Mahindra CIE Automotive Limited.
 
 a.  Mahindra Ugine Steel Company Limited
 
 b.  Mahindra Gears International Limited
 
 c.  Mahindra Investments (India) Private Limited
 
 2.  Consequent to the Scheme of Arrangement referred to in Note 38
 transactions entered into from 1st April 2014 to 7th December, 2014
 with Mahindra Engineering Services Limited, have been disclosed as
 transactions entered into with Tech Mahindra Limited.
 
 9.  The outstanding derivative instruments and unhedged foreign
 currency exposures as on 31s'' March, 2016 :
 
 The Company has outstanding foreign exchange forward contracts to sell
 US $ 9.90 crores (2015 : US $ 13.30 crores), EURO 0.60 crores (2015 :
 EURO 0.50 crores), AUD 0.90 crores (2015 : Nil crores) & ZAR 16.00
 crores (2015 : Nil crores). In addition, the Company has also taken
 foreign exchange forward contract for US $ 1.71 crores to buy US $
 (2015 : Nil crores)
 
 The foreign currency exposures not hedged by derivative instruments or
 otherwise as on 31st March, 2016 are - Receivables of ZAR 11.80 crores,
 US $ 4.68 crores, KRW 5.12 crores, AUD 0.72 crores, GBP 0.20 crores,
 EURO 0.12 crores and Payables (excluding Borrowings, covered in the
 paragraph below) of JPY 16.22 crores, SEK0.01 crores and CHF * crores
 (2015 : Receivables of US $ 8.83 crores, AUD 0.58 crores, GBP 0.25
 crores and Payables (excluding Borrowings, covered in the paragraph
 below) of JPY 33.46 crores, KRW 7.42 crores, EURO 0.46 crores, ZAR 0.15
 crores, SEK 0.04 crores and CHF * crores).
 
 The Company has outstanding foreign currency borrowings of US $ 15.50
 crores (2015 : US $ 31.70 crores). Currency risk on US $ liability of
 US S 5.50 crores has been hedged by way of forward contracts (2015 : US
 $ 1.70 crores). The US $ interest rate risk on borrowings worth US S
 15.00 crores has been hedged using interest rate swaps.
 
 * denotes amounts less than 50,000 of respective currency.
 
 Notes :
 
 (i) Credits, if any, recoverable in respect of short landings etc. are
 not considered.
 
 (ii) The value of imports shown above includes :
 
 (a) Imports on C&F basis as per supplier''s invoices Rs. 0.25 crores
 (2015 : Rs. 63.03 crores).
 
 (b) Imports on ''cost'' basis Rs. 479.45 crores (2015 : Rs. 595.12
 crores).
 
 Note :
 
 F.O.B. value of exports includes local sales which qualify for export
 benefits and for which payment is receivable in foreign currency and
 local/ export sales under rupee credit which qualify for export
 benefits.
 
 Notes :
 
 1 Business Segments :
 
 The Company has considered business segments as the primary segment for
 disclosure.
 
 The segment have been identified taking into account the organisational
 structure as well as the differing risks and returns of these segments.
 
 Automotive Segment comprises of sale of automobiles, spare parts and
 related services.
 
 Farm Equipment Segment comprises of sale of tractors, spare parts and
 related services.
 
 2 Secondary Segments :
 
 The geographical segments are considered for disclosure as secondary
 segment.
 
 Domestic Segment includes sales to customers located in India and
 service income accrued in India.
 
 Overseas Segment includes sales and services rendered to customers
 located outside India.
 
 10.  Previous year''s figures have been regrouped/restated wherever
 necessary.
Source : Dion Global Solutions Limited
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