(a) Secured Borrowings :
Secured Non Convertible Debentures of Rs. 400.00 crores carrying an
interest rate of 11.95% are for a period of seven years and are
repayable in three equal yearly installments commencing from December,
2013. These debentures are secured by tangible assets of the Company at
certain locations including immovable items therein and by way of a
first pari-passu charge on the movable plant and machinery, machinery
spares, tools and accessories and other movables, both present and
future (save and except book debts) situated at certain locations of
(b) Unsecured Borrowings :
Term loans from banks include External Commercial Borrowings of
(i) Rs. 1,526.25 crores carrying a margin over three month USD Libor
and are repayable after five years and one day from the date of
respective availment of loan i.e. Rs. 763.13 crores in February, 2016,
Rs. 508.75 crores in August, 2016 and Rs. 254.37 crores in September,
(ii) Rs. 238.49 crores carrying a margin over six month JPY Libor is
for a period of five years and one day. This loan is repayable in three
equal annual installments commencing from August, 2012. The installment
payable in August, 2012 is included under current maturities of long
Fixed deposits are repayable after three years from the date of deposit
and carry an interest rate of 8.00% and 9.75%.
Other Loans includes deferred sales tax loan which is interest free and
repayable in five equal installments after ten years from the year of
availment of respective loan.
(a) Secured Borrowings :
Loans and Advances on cash credit accounts from the Company''s bankers
are secured by a first charge on a pari-passu basis on the whole of the
current assets of the Company namely inventories, book debts,
outstanding monies, receivables, claims etc. both present and future.
(b) Unsecured Borrowings :
Fixed deposits are for a period of one year and carry an interest rate
of 7.00% and 8.50%.
(a) Long Term Loans and Advances to Related Parties include Share
Application Money pending allotment Rs. Nil (2011 : Rs. 15.70 crores)
(b) Other Loans and Advances includes :
(i) Amount held in escrow account towards acquisition of shares in a
company Rs. Nil (2011 : Rs. 23.50 crores).
(ii) Payment towards income-tax and surtax Rs. 321.71 crores (2011 :
Rs. 286.75 crores).
(iii) VAT receivable, other recoverable expenses and advances to
(a) Loans and Advances to Related Parties includes Fixed/Call deposits
with/loans to limited companies Rs. 283.47 crores (2011 : Rs. 458.63
crores) including Rs. 278.88 crores (2011 : Rs. 454.04 crores) to
(b) MAT Credit entitlement included in Other Loans and Advances is Rs.
165.23 crores (2011 : Rs. Nil).
(c) Other Loans and Advances also includes balances with government
authorities, advance to suppliers, other recoverable expenses, deposits
and prepaid expenses.
(a) The consumption in value has been ascertained on the basis of
opening stock plus purchases less closing stock and includes the
adjustment of excesses and shortages as ascertained on physical count
and write-off of obsolete and unserviceable raw materials and
(b) The consumption shown in Components other than Tyres and Tubes
(including processing charges) is the balancing figure based on total
consumption shown in Statement of Profit and Loss.
(a) Repairs and Maintenance to Machinery includes machinery spares
consumed Rs. 42.47 crores (2011 : Rs. 36.05 crores) but does not
include items included under Consumption of Raw Materials and
Bought-out Components and amounts charged to salaries and wages
(amounts not ascertained).
1. Interest capitalised during the year to CWIP Rs. 2.89 crores (2011
: Rs. 28.73 crores).
2. Employee Benefits :
General description of defined benefit plans :
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.
* denotes amounts less than Rs. 50,000
On account of defined contribution plans the Company''s contribution to
Provident Fund and Superannuation Fund aggregating Rs. 98.09 crores
(2011 : Rs. 86.19 crores) has been recognised in the Statement of
Profit and Loss under the head Employee Benefits Expense.
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.
3. Provisions :
(a) Provision for warranties 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 3 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 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.
In respect of options granted prior to 29th September, 2006, the equity
settled options vest one year from the date of the grant and are
exercisable on specified dates in 3 tranches within a period of 5 years
from the date of vesting. The number of options exercisable in each
tranche is between a minimum of 100 and a maximum of 1/3rd of the
options vested, except in case of the last date of exercise, where the
employee can exercise all the options vested but not exercised till
Options granted on or after 29th September, 2006 but prior to 28th
January, 2011 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 after 28th January, 2011 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.
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. 97.97 crores
(2011 : Rs. 29.37 crores) being the amortisation of deferred employee
compensation, after adjusting for reversals on account of options
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. 5.51 crores, Profit after tax higher by Rs. 5.51
crores and the basic and diluted earnings per share would have been
higher by Rs. 0.09 & Rs. 0.09 respectively.
5. Contingent Liability & Commitments :
(A) Contingent Liability :
(a) Guarantees given by the Company :
guarantees Outstanding amounts
2012 2011 2012 2011
For other companies 171.98 367.63 166.83 316.62
(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. 1,464.96 crores (Net of Tax : Rs. 1,059.91 crores)
[2011 : Rs. 1,212.45 crores (Net of Tax : Rs. 874.23 crores)].
(ii) Other matters (excluding claims where amounts are not
ascertainable) : Rs. 21.36 crores (Net of Tax : Rs. 15.05 crores) [2011
: Rs. 17.86 crores (Net of Tax : Rs. 13.58 crores)].
(iii) Claims on capital account : Rs. Nil (2011 : Rs. 1.18 crores).
(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. 319.29 crores (2011 : Rs. 215.99 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. 70.98 crores (2011 : Rs. 71.61 crores).
- Surtax matters : Rs. 0.13 crores (2011 : Rs. 0.13 crores).
(d) Bills discounted not matured Rs. Nil (2011 : Rs. 49.97 crores).
(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. 304.11 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 and hence the Company has a
very good chance of succeeding in the matter. 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. 328.86 crores (2011 : Rs. 328.86 crores) and the interest of Rs.
233.13 crores (2011 : Rs. 204.13 crores) accrued on the same upto 31st
March, 2012, as a Contingent Liability in the Accounts and the same is
included in the amounts disclosed under Note (b)(i) above.
(B) Commitments :
(a) Uncalled liability on equity shares partly paid Rs. 10.50 crores
(2011 : 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, 2012 is Rs.
590.44 crores (2011 : Rs. 746.29 crores).
6. A demand of Rs. 704.28 crores was raised on the Company in its
main assessment for the Assessment Year 2007-08 on the basis of a
certain legal position taken by the Additional Commissioner of Income
Tax (TDS) - Nashik with regard to deduction of tax at source on
procurement of components from various vendors. The Company is in
appeal against the demand before the Income Tax Appellate Tribunal,
Mumbai (ITAT). The Nashik tax deduction matter was earlier agitated by
the Company before the Income Tax Appellate Tribunal, Pune which while
deciding the issue in favour of the Company, set aside the matter to
the Commissioner of Income Tax (Appeals) at Nashik (CIT(A)) for certain
factual examination. The CIT(A) at Nashik has, after examination of the
relevant facts, finally disposed off the matter in favour of the
Company. The hearing before the ITAT, Mumbai has concluded and the
final written order is awaited.
7. 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.
430.34 crores (2011 : Rs. 376.85 crores) [excluding depreciation and
amortisation of Rs. 137.13 crores (2011 : Rs. 76.54 crores)].
(ii) Development expenditure incurred during the year Rs. 257.47 crores
(2011 : Rs. 127.41 crores).
(iii) Capitalisation of assets Rs. 540.29 crores (2011 : Rs. 323.33
(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.
30.49 crores (2011 : Rs. 12.72 crores) [excluding depreciation and
amortisation of Rs. 6.41 crores (2011 : Rs. 1.24 crores)].
(ii) Development expenditure incurred during the year Rs. 0.04 crores
(2011 : Rs. 44.20 crores).
(iii) Capitalisation of assets Rs. 4.12 crores (2011 : Rs. 3.35
8. The net difference in foreign exchange gain credited to the
Statement of Profit and Loss is Rs. 16.31 crores (2011 : gain of Rs.
9. Scheme of Arrangement :
(a) Pursuant to the Scheme of Arrangement (The Scheme) between
Mahindra Automobile Distributor Private Limited (MADPL), a subsidiary
of the Company, and the Company, as 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 MADPL
was transferred to and vested in the Company, from 1st April, 2011 (the
appointed date). The scheme became effective on 23rd April, 2011.
The accounting of this arrangement was done as per the scheme approved
by Honourable High Court of Bombay and the same has been given effect
to in the financial statements as under :
(i) MADPL reorganised its Share Capital and Securities Premium Account
by writing off it''s accumulated losses first against Securities Premium
Account and the balance against the Share Capital. Consequent to this
reorganisation the Company''s investment in MADPL reduced by
27,61,40,768 shares leading to a reduction in investment value of Rs.
113.93 crores which has been set off by reversing Rs. 113.93 crores
from the provision for diminution in value of investments of Rs. 114.24
crores made in an earlier year. The balance Rs. 0.31 crores was
transferred back to Investment Fluctuation Reserve.
(ii) The assets and liabilities of the Automotive business of MADPL
were recorded in the books of the Company at their book values.
(iii) The debit balance in the Profit and Loss account of Automotive
business of MADPL of Rs. 207.52 crores was transferred to the General
(iv) In consideration for the above, the Company, in the ratio of one
equity share of Rs. 5 each for every 3,162 equity shares of Rs. 10 each
originally held in MADPL, issued 5,917 equity shares of Rs. 5 each to
the external shareholders of MADPL on 17th May, 2012, (disclosed as
Share Capital Suspense Account in the Balance Sheet), and cancelled the
shares to be issued to itself and its subsidiary in lieu of its own and
the subsidiary''s holding in MADPL.
(v) The excess of the value of the net liabilities of the Automotive
business of MADPL over the face value of the shares allotted amounting
to Rs. 1.37 crores was debited to the Capital Reserve.
(b) In 2009 and 2010, as required by Accounting Standard 28''Impairment
of Assets'', Mahindra Automobile Distributor Private Limited (MADPL)
(formerly known as Mahindra Renault Private Limited) had provided for
an impairment of its fixed assets related to its Automotive business
aggregating Rs. 317.44 crores. As a consequence, in F2009 the Company
in its own books fully provided for its own investment in MADPL of Rs.
154.38 crores by a transfer from its Investment Fluctuation Reserve. In
F2011 an amount of Rs. 37.41 crores out of this provision was actually
utilised and Rs. 2.73 crores reversed back to Investment Fluctuation
Reserve on transfer of a part of the Company''s holdings in MADPL to a
subsidiary, thus leaving a balance provision of Rs. 114.24 crores as on
31st March, 2011 for the Company''s investment in MADPL.
As per the Scheme of Arrangement referred in note (a) above, the
Automotive business of MADPL merged with the Company with effect from
1st April, 2011. As the provision on impairment of Rs. 317.44 crores
which got transferred from MADPL was no longer required, the Company
after providing Rs. 95.24 crores for the depreciation not provided by
MADPL for the years 2010 and 2011 and after transferring Rs. 113.93
crores to the Investment Fluctuation Reserve to replenish the charge to
it on account of write down of Company''s investment in MADPL [Point
(a)(i) above] transferred the balance of Rs. 108.27 crores to the
Statement of Profit and Loss and the same has been disclosed as an
The result for the year ended 31st March, 2012 also include the result
of the Automotive business transferred from MADPL and a tax saving of
Rs. 148.53 crores arising from the carried forward unabsorbed past
losses and deferred tax positions.
The current year figures are therefore not strictly comparable with
that of the previous year.
(c) In the previous year, pursuant to the Scheme of Arrangement (the
scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay on 25th March, 2011,
the assets and liabilities, duties and obligations of the Non fruit
business of Mahindra Shubhlabh Services Limited (MSSL) were transferred
to and vested in the Company, with effect from 1st January, 2010. The
excess of the value of net assets of MSSL over the face value of shares
allotted was credited to the Securities Premium Account.
10. Exceptional item of Rs. 108.27 crores (2011 : Rs. 117.48 crores)
(a) Reversal of Impairment loss, taken over as per Scheme of
Arrangement Rs. 108.27 crores (2011 : Rs. Nil).
(b) Profit on sale of certain long term investments Rs. Nil (2011 : Rs.
11. Outstanding derivative instruments and unhedged foreign currency
exposures as on 31st March, 2012 :
The Company has taken foreign exchange contracts amounting to US $
13.00 crores (2011 : US $ 9.90 crores) comprising Forward Contracts US
$ 11.40 crores (2011 : US $ 4.50 crores), Range Forwards - Nil (2011 :
US $ 3.60 crores), Plain Vanilla Put Options US $ 0.70 crores (2011 :
Nil) and derivative structures in the form of ''strips'' - US $ 0.90
crores (2011 : US $ 1.80 crores).
The foreign currency exposures not hedged by derivative instruments or
otherwise as on 31st March, 2012 are - Receivables of ZAR 5.88 crores,
US $ 3.63 crores, AUD 0.57 crores, GBP 0.37 crores, AED 0.05 crores and
Payables of JPY 4.42 crores, EUR 0.43 crores, RMB 0.15 crores, SEK 0.04
crores, CHF * crores, SGD * crores (2011 : KRW 93.31 crores, US $ 4.12
crores, ZAR 3.50 crores, EUR 0.38 crores, GBP 0.29 crores, AUD 0.26
crores, NZD 0.01 crores, CHF * crores, RMB * crores, Investments of KRW
9,540.48 crores and Payables of JPY 3.80 crores, SEK 0.04 crores, SGD *
The Company has outstanding foreign currency borrowings of JPY 994.21
crores and US $ 30.00 crores (2011 : JPY 676.20 crores and US $ 15.00
crores). The borrowing of JPY 582.30 crores (2011 : JPY 676.20 crores)
has been fixed to a US $ liability using a cross currency swap and the
borrowing of JPY 411.91 crores has been fixed to INR liability using a
cross currency swap. During the year, the Company raised ECB amounting
to US $ 15.00 crores (2011 : US $ 15.00 crores). The US $ interest rate
risk has been hedged using an interest rate swap.
During the financial year ended 31st March, 2011, the Company had
subscribed to bonds issued by Ssangyong Motor Company Limited amounting
to KRW 9,540.48 crores. The Company during the current financial year
has hedged the foreign currency risk of the bond (including interest)
using suitable forwards.
* denotes amounts less than 50,000 of respective currency.
(i) Fee for use of technology, development expenditure and software
expenditure [referred to in Note 1(C)]
(a) Written off during the year Rs. 43.62 crores (2011 : Rs. 12.89
(b) amount remitted during the year Rs. 123.82 crores (2011 : Rs. 61.25
crores) net of tax deducted at source of Rs. 8.74 crores (2011 : Rs.
3.50 crores) are not included in the above figures.
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
12. Previous year''s figures have been regrouped/restated wherever