Punj Lloyd

1.  Basis of preparation
 
 These abridged financial statements have been prepared in accordance
 with the requirements of Rule 7A of the Companies (Central
 Government’s) General Rules and Forms, 1956 and clause 32 of the
 Listing Agreement. These abridged financial statements have been
 prepared on the basis of the complete set of financial statements for
 the year ended March 31, 2009.
 
 2.  [7] Contingent liabilities not provided for :  (Amount In INR ‘000)
                                              2008-09      2007-08
 
 a) i) Bank Guarantees given by the Company 4,743,929     623,295 
    ii) Bank Guarantees given on behalf of 
   subsidiaries and joint ventures            234,456      55,456
 b) Liquidated damages deducted by 
   customers not accepted by the Company
  and pending final settlement.(Also refer 
   note 6 (a) below)*                         508,835     501,725
 
 c) Corporate Guarantees given on behalf 
    of subsidiaries, joint ventures
    and associates                         60,768,392   32,817,356
                                           66,255,612   33,997,832
 
 * excludes possible liquidated damages which can be levied by customers
 for delay in execution of projects. The management believes that there
 exist strong reasons why no liquidated damages shall be levied by these
 customers.
 
 d) Estimated future investments in joint venture & other companies in
 terms of respective shareholder agreements amounting in aggregate to
 Rs. 289,999 thousand (Previous year Rs. 289,999 thousand).
 
 e) (i) Sales tax demand of Rs. 52,173 thousand (Previous year Rs.
 37,432 thousand) on the material components of the works contracts
 pending
 
 with Sales Tax Authorities and High Court. * (ii) Sales tax demand of
 Rs. 66,006 thousand (Previous year Rs. 66,006 thousand) for non
 submission of statutory forms.*
 
 (iii) Sales tax demand of Rs. 4,201 thousand (Previous year Rs. 4,201
 thousand) for disallowance of deduction on purchases.*
 
 (iv) Sales Tax liability of Rs. 84,946 thousand (Previous year Rs.
 38,413 thousand) for purchases against sales tax forms not accepted by
 
 department.* (v) Entry Tax liability of Rs. 32,806 thousand (Previous
 year Rs. 18,856 thousand) against entry of goods into the local area
 not accepted by department.*
 
 (vi) Sales Tax liability of Rs. 720 thousand (Previous year Rs. 720
 thousand) against the CST demand on sales in transit.*
 
 (vii) Sales Tax Liability of Rs. 36,958 thousand (Previous year Rs.
 20,278 thousand) against disallowance of deductions.* (viii) Penalty
 for late deposit of Service Tax of Rs. 108,068 thousand (previous year
 Rs. Nil).* (ix) Sales tax demand in respect of Internet Service
 Division regarding taxability of internet services Rs. 21,178 thousand
 (Previous year Rs. 21,178
 
 thousand). The same is contested by the company in view of similar
 matter decided by the Hon’ble Supreme Court of India in the case of
 
 Bharat Sanchar Nigam Limited & another Vs Union of India & others
 wherein it was held that internet services are not taxable as goods. *
 *Based on favourable decisions in similar cases / legal opinions taken
 by the Company / consultations with solicitors, the management believes
 that the Company has good chances of success in above mentioned cases
 and hence, no provision there against is considered necessary.
 
 3.  [11] The following note has been referred to by the Auditors in
 their Auditor’s Report on the complete set of financial statements
 dated May 18, 2009:
 
 (a) The Company had executed a pipeline project at Dahej- Vijaypur for
 Gas Authority of India Limited (GAIL) in an earlier year. GAIL had
 withheld Rs. 433,467 thousand (Previous year Rs. 416,343 thousand) as
 liquidated damages, the customer had also not certified the final bill
 amounting to Rs. 31,455 thousand (Previous year Rs. 31,455 thousand)
 which is being carried forward under accrued income and Rs. 40,441
 thousand (Previous year Rs. 40,441 thousand) towards other deductions,
 which the Company is disputing. Also, the Company has filed some other
 claims with GAIL amounting to Rs. 999,004 thousand (Previous year Rs.
 999,004 thousand). These claims have not been accounted for in the
 books.  The Company had gone into arbitration against GAIL for recovery
 of amount withheld as liquidated damages & other deductions and claims
 of the Company. Pending outcome of arbitration, amount withheld for
 liquidated damages & other deductions are being carried forward under
 sundry debtors. The Company has been legally advised that there is no
 justification in imposition of liquidated damages and other deductions
 by GAIL and hence the above amount is considered good of recovery.
 
 (b) The Company had executed a pipeline project for Petronet MHB
 Limited in an earlier year. The customer had withheld Rs.4,440 thousand
 (Previous year Rs 4,440 thousand) from the running bills, which are
 being carried forward under sundry debtors. The customer had also not
 certified the final bill amounting to Rs.64,000 thousand (Previous year
 Rs.64,000 thousand) which is being carried forward under accrued
 income. The Company had raised claims for Rs.517,387 thousand (Previous
 year Rs.517,387 thousand), which are not accounted for in the books.
 For recovery of the said amounts, which are being disputed by the
 customer, the Company has initiated Arbitration proceedings. The
 outstanding amounts are considered good of recovery.
 
 (c) The Company had executed a pipeline project at Pune – Solapur for
 Hindustan Petroleum Company Limited (HPCL) in an earlier years. HPCL
 has withheld Rs 32,874 thousand as reduction in the contract price and
 Rs. 12,707 thousand towards other deductions, which the Company is
 disputing. Also the company has filed certain claims for Rs 31,437
 thousand for additional work. These claims have not been accounted for
 in the books. The company has gone into arbitration against HPCL for
 recovery of amount withheld as reduction in contract price & other
 deductions and claims of the Company. Pending outcome of arbitration,
 amount withheld for reduction in contract price & other deductions are
 being carried forward under sundry debtors. The company has been
 legally advised that there is no justification in reduction of contract
 price & other deductions by HPCL and hence the above amount is
 considered good of recovery.
 
 (d) The Company had executed a pipeline project at Mundra - Delhi for
 Hindustan Petroleum Company Limited (HPCL) in an earlier years. HPCL
 has withheld Rs 36,139 thousand as reimbursement of service tax, which
 the Company is disputing. The company has gone into arbitration against
 HPCL for recovery of amount withheld as reimbursement of service tax
 and the award has been pronounced in favour of the Company in earlier
 year. HPCL has challenged the arbitration award and filed a petition
 against this award in Bombay High Court. The Company has been legally
 advised that there is no justification in non reimbursement of service
 tax by HPCL and hence the above amount is considered good of recovery.
 
 (e) The Company had executed a Highway / Carriageway project at Jaipur
 bypass for National Highway Authority of India (NHAI) in an earlier
 year.  NHAI has withheld Rs 45,015 thousand towards additional work as
 agreed with NHAI, which the Company is disputing. The company had gone
 into arbitration against NHAI for recovery of amount for additional
 work and the award has been pronounced in favour of the Company for Rs.
 4,509 thousand in an earlier year, which has not been accepted by the
 Company. The Company has challenged the arbitration award and filed a
 petition against this award in Delhi High Court. The Company has been
 legally advised that there is no justification in non payment of
 additional work as agrred by
 
 and hence the above amount is considered good of recovery.
 
 All the above loans and advances are repayable on demand
 
 4.  [22] The Company has exercised the option as per the Companies
 Accounting Standard Rules, 2009. As per the option exchange differences
 related to long term foreign currency monetary items so far as they
 relate to the acquisition of a depreciable capital assets are
 capitalized and depreciated the same over the useful life of the assets
 and in other cases, have been transferred to Foreign Currency Monetary
 Item Translation Difference Account and amor- tized over the balance
 period of such long term assets/liabilities but not beyond accounting
 period ending on or before 31st March 2011. The unamortized balance in
 this account is Rs. 462,946 thousand.
 
 5.  [23] The Company has reviewed its branch operations in Middle East
 and North Africa and based on its review and also advice given by
 independent con- sultants, have decided to give these branch operations
 more autonomy and independence. Accordingly, the management announced
 and implemented certain policies and took certain steps affecting the
 functioning of the overseas branches which were completed by October,
 2008. In view of the above changes, the management is of the view that
 with effect from October 01, 2008, the operations of the branches
 should be considered as non-integral instead of integral as considered
 hitherto. As a result, exchange differences arising on translation of
 financial statements of the overseas branches for the six months period
 ended March 31, 2009 have been transferred to foreign currency
 translation reserve account instead of taking the same to profit and
 loss account, resulting in profit for the year being higher by Rs.
 303,215 thousand.
 
 6.  [24] Loans to Subsidiaries include Rs. 1,193,057 thousand
 (including interest theron) on account of loan given by the Company to
 its step-down subsid- iary, Simon Carves Limited, UK (‘Simon’) and also
 encashment of bank guarantee given by the Company to a customer of such
 step down subsidiary. As per the audited financial statements of Simon
 as at March 31, 2009, it has incurred substantial losses during the
 year, resulting in its accumulated losses far exceeding its net worth.
 The Company is hopeful that in view of the restructuring undertaken by
 Simon and its future profitability projections, Simon would be able to
 repay the above amount.
 
 In any case, Punj Lloyd Pte Ltd, Singapore (PLPL), a subsidiary of the
 Company and the immediate holding Company of Simon, has guaranteed the
 pay- ment of above outstanding to the Company in case Simon is unable
 to pay the same.