1. Basis of preparation of financial statements
The financial statements are prepared and presented under the historical
cost convention, on the accrual basis of accounting except for certain
derivative instruments which are measured at fair value in accordance
with generally accepted accounting principles in India (Indian GAAP)
and comply in all material respects with the accounting standards
notified in the Companies (Accounting Standards) Rules 2006, (as
amended) issued by the Central Government, in consultation with
National Advisory Committee on Accounting Standards (''NACAS'') and
relevant provisions of Companies Act, 1956 (''the Act'').
Amalgamation of Siemens VAI Metals Technologies Pvt. Ltd. (SVAI) and
Morgan Construction Company India Pvt. Ltd. (Morgan)
Pursuant to the scheme of amalgamation (''the scheme'') of SVAI and
Morgan with the Company under sections 391 to 394 of The Companies
Act sanctioned by the Honorable High Court of Bombay on 17 August
2012, the assets and liabilities of SVAI and Morgan were transferred to
and vested in the Company with effect from 1 October 2011. Accordingly,
the scheme has been given effect to in these accounts.
The operations of SVAI include providing Metallurgical Plant Building
Technology catering services. Morgan is engaged in the business of
design & engineering, equipment supply and supervision of erection &
commissioning of wire rods and bar mills.
The amalgamation has been accounted for under the pooling of
interests method as prescribed by AS-14 ''Accounting for
Amalgamations''. Accordingly, the accounting treatment has been given as
under- i. The assets, liabilities, reserves and credit balance of
profit and loss of SVAI and Morgan as at 1 October 2011 have been
incorporated at their book values in the financial statements of the
ii. 890,600 equity shares of Rs. 100 each fully paid up of SVAI stands
cancelled. Further, 1,986,705 equity shares of Rs. 10 each fully paid up
of Morgan and investment in such shares held by SVAI also stands
iii. Consequent to this amalgamation and after considering the
extinguishment of shares held in Morgan by SVAI, 11,738,108 ordinary
shares of Rs. 2 each, aggregating to Rs. 23 million, of the Company are to
be issued to the shareholders of SVAI. Pending allotment of the said
equity shares, such amount of Rs. 23 million has been included in the
share capital suspense account as at 30 September 2012. These shares
have been subsequently allotted on 13 October 2012.
iv. The excess of the book value of the investments held by SVAI in the
equity share capital of Morgan over the face value of such share
capital amounts to Rs. 270 million and the excess of share capital of
SVAI over the amount credited by the Company to the share capital
suspense account amounts to Rs. 66 million and accordingly the net amount
of Rs. 204 million has been adjusted to the General Reserve of the
Company. Further, Rs.156 million and Rs. 549 million respectively being the
credit balance of profit and loss of SVAI and Morgan as at 1 October
2011 has been incorporated in the balance of profit and loss of the
Consequently, the financial statements for the year ended 30 September
2012 include the operations of SVAI and Morgan with effect from 1
October 2011 and included in the Industry segment.
3 Share capital (Continued)
e) Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs.
2 per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pays dividends in Indian rupees.
During the year ended 30 September 2012, the amount of per share
dividend recognised for distribution to equity shareholders was Rs. 6
(2011: Rs. 6).
In the event of liquidation of the Company, the holder of equity shares
will be entitled to receive remaining assets of the Company, after
distribution of all preferential amounts (if any). The distribution
will be in proportion to the number of equity shares held by the
4 Contingent liabilities
Estimated amount of contracts remaining
to be executed on capital account
and not provided for (net of advances) 1,606 1,783
(b) Contingent liabilities
Income tax (excluding interest) 159 158
Excise / sales tax liabilities, under dispute 1,804 958
Customs liabilities, under dispute 120 120
Claims against the Company not acknowledged
as debts 149 143
In respect of above contingent liabilities, the future cash outflows are
determinable only on receipt of judgments pending at various forums /
5 Disclosure relating to Provisions
Provision for warranty
Warranty costs are provided based on a technical estimate of the costs
required to be incurred for repairs, replacement, material cost,
servicing and past experience in respect of warranty costs. It is
expected that this expenditure will be incurred over the contractual
Provision for liquidated damages
Liquidated damages are provided based on contractual terms when the
delivery/ commissioning dates of an individual project have exceeded or
are likely to exceed the delivery / commissioning dates as per the
respective contracts. This expenditure is expected to be incurred over
the respective contractual terms up to closure of the contract
(including warranty period).
Provision for loss orders
A provision for expected loss on construction contracts is recognised
when it is probable that the contract costs will exceed total contract
revenue. For all other contracts loss order provisions are made when
the unavoidable costs of meeting the obligation under the contract
exceed the currently estimated economic benefits.
The Company has made provisions for known contractual risks, litigation
cases and pending assessments in respect of taxes, duties and other
levies, the outflow of which would depend on the cessation of the
General description of the leasing arrangement:
(i) The Company has entered into operating lease arrangements for its
office premises, storage locations, residential premises and motor cars
for its employees.
(ii) The future lease rental payments are determined on the basis of
the monthly lease payment terms as per the agreements.
(iii) At the expiry of the non-cancellable lease period the option of
renewal rests with the Company.
(iv) Some of the lease agreements have escalation clause ranging from
5% to 15%. There are no exceptional / restrictive covenants in the
(iii) Other disclosures :
- Inter-segment prices are normally negotiated amongst the segments
with reference to the costs, market price and business risks.
- Profits / losses on inter segment transfers are eliminated at the
- During the year, there has been a re-organisation of the Business
segments. Figures for the year ended 30 September 2011 have been
regrouped to make them comparable.
(iv) Segment information :
The primary and secondary reportable segments are business segments and
geographical segments respectively.
Business Segments: The business of the Company is divided into four
segments. These segments are the basis for management control and
hence, form the basis for reporting. The business of each segment
comprises of :
- Infrastructure and Cities : - Provides Electrical Installation
Technologies, i.e. Products for Building, e.g. Miniature Circuit
breakers, Distribution boards, Residual Current Circuit Breakers etc.
It also provides solutions for rail automation, railway electrification,
light and heavy rail, locomotives, trains, turnkey projects and
integrated services. Also provides solutions for the automation of
power grids to products like medium-voltage switchgear and components.
- Industry :- Provides complete range of automation products & systems,
industrial automation systems & low- voltage switchgears, complete
range of large and standard drives and motors, special purpose motors,
process and motion control systems. Also undertakes turnkey projects in
the industrial and infrastructure sectors over the entire life cycle
including concept, engineering, procurement, supplies, installation,
commissioning and after sales services.
- Energy :- Offers highly efficient products and solutions for power
generation based on fossil fuels. It ranges from individual gas and
steam turbines and generators, to turnkey power plants. Also offers
customer products and solutions used for extraction, conversion and
transport of oil and gas. Also provides solutions for power generation
and distribution including products and solutions in the high-voltage
feld – such as High Voltage Direct Current (HVDC) transmission systems,
substations, switchgear and transformers.
- Healthcare :- Provides diagnostic, therapeutic and life-saving
products in computer tomography (CT), magnetic resonance imaging (MRI),
ultrasonography, nuclear medicine, digital angiography, patient
monitoring systems, digital radiography systems, radiology networking
systems, lithotripsy and linear accelerators.
Geographical Segments: The business is organised in two geographical
segments i.e. within India and outside India.
6 Disclosure pursuant to Accounting Standard -15 ''Employee Benefits'' :
(i) Defend Contribution Plans
Amount of Rs. 216 (2011: Rs. 188) is recognised as an expense and included
in employee benefits expense (Refer note 24) in the statement of proft
b) The fund formed by the Company manages the investments of the
Gratuity Fund. Expected rate of return on investments is determined
based on the assessment made by the Company at the beginning of the
year on the return expected on its existing portfolio, along with the
estimated incremental investments to be made during the year. Yield on
portfolio is calculated based on a suitable mark-up over the benchmark
Government securities of similar maturities. The Company expects to
contribute Rs. 100 to gratuity fund in 2012-13.
c) The estimates of future salary increases, considered in actuarial
valuation, take in to account inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
d) The Company has contributed Rs. 396 (2011:Rs. 284) towards provident fund
during the year ended 30 September 2012. The Guidance on Implementing
AS 15, Employee Benefits (Revised 2005) issued by Accounting Standard
Board (ASB) states that benefits involving employer established
provident funds, which require interest shortfalls to be recompensed
are to be considered as defined benefit plans. The Actuary Society of
India has issued the final guidance for measurement of provident fund
liabilities on 1 April 2011. The Actuary has accordingly provided a
valuation and based on the assumptions provided below there is no
shortfall as at 30 September 2012 and 2011 respectively.
(iii) General descriptions of significant defined plans
I Gratuity Plan
Gratuity is payable to all eligible employees of the Company on
superannuation, death and permanent disablement, in terms of the
provisions of the Payment of Gratuity Act, 1972 or as per the Company''s
Scheme whichever is more beneficial.
Post-Retirement Medical Benefit is paid to eligible employees in case of
survival up to the retirement age and after death, benefits are available
to the employee''s spouse. The Company reimburses the employees for
expenses incurred over and above the claim accepted by the insurance
company. The Company pays 80% of difference between liability incurred
by employee and claim received from insurance company subject to
ceiling based on the grade of employees.
7 Derivative Instruments (Continued)
The forward contracts have been converted in Indian rupees, at the spot
rates, as at 30 September 2012 to facilitate reading purposes only.
The Company has a policy of hedging its foreign currency exposure on a
net basis. Accordingly, unheeded balances of receivables and payables
are disclosed on a net basis.
* Denotes figures less than a million
8 Other Costs, net
Miscellaneous expenses as disclosed in Note 26 includes Rs. Nil (2011: Rs.
451) in respect of provisions created for sales tax matters of earlier
9 Exceptional item
The Company has incurred an amount of Rs. 1,330 as at 30 September 2012
on acquisition of land, construction of buildings and other expenditure
for setting up a manufacturing facility for the wind energy business
included in Energy segment. The Company has estimated an additional
expenditure of Rs. 823 towards completing the construction work, which is
in progress. In view of the current business scenario, the Board of
Directors reviewed the plan for the wind energy business and decided to
use these assets for alternate purposes. Based on evaluation of various
options, the Company has recognized an impairment loss of Rs. 1,032 and
other consequential provisions of Rs. 168, aggregating Rs. 1,200 which is
reflected as an exceptional item in the statement of profit and loss.
The recoverable amount for ascertaining the impairment loss was based
on the market value of land and realisable value of buildings based on
alternative use as determined by an independent valuation.
10 Prior period items
In accordance with the practice consistently followed and pursuant to
significant developments in certain projects, the Company revises
estimated revenue, costs and project related provisions. During the
course of the year, the Company has identified certain updates relating
to the prior year. The total of such updates are debited to the
statement of profit and loss and impact the current year''s profit before
tax by Rs. 799 (2011: Rs. Nil). Details are as under:
11 Proposed Amalgamations
(i) The Board of Directors approved the amalgamation of Siemens Power
Engineering Pvt. Ltd., Gurgaon (SPEL - a 100% subsidiary of Siemens AG)
with the Company on 31 January 2012. The amalgamation scheme was fled
with the Honorable High Courts of Bombay and Punjab & Haryana on 20
February 2012 and 22 March 2012 respectively. In terms of the scheme,
the appointed date is 01 October 2011 and the share swap ratio will be
6 equity shares of the face value of Rs.2 each fully paid-up of the
Company for every 13 equity shares of the face value of Rs. 10 fully
paid-up of SPEL. The Shareholders of the Company approved the
amalgamation in their meeting held on 11 April 2012. The Honorable
High Court of Bombay has approved the Scheme of amalgamation on 2
November 2012 but awaiting the Order from the Honorable High Court of
Punjab & Haryana.
Pending approval of the aforesaid High Courts, no effects of the above
mentioned proposed amalgamation have been recognised in these financial
(ii) The Board of Directors approved the amalgamation of Winergy Drive
Systems India Pvt. Ltd. (Winergy) with the Company on 10 August 2012.
The amalgamation scheme was fled with the Honorable High Courts of
Bombay and Madras on 28 August 2012 and 4 September 2012 respectively.
In terms of the scheme, the appointed date is 1 October 2012 and the
share swap ratio will be 1 equity shares of the face value of Rs. 2 each
fully paid-up of the Company for every 72 equity shares of the face
value of Rs. 10 fully paid-up of Winergy.
12 Prior year comparatives
Pursuant to the amalgamation of SVAI and Morgan (Refer note 2) , the
figures of the current year are not strictly comparable to those of the
previous year. Previous year''s figures have been regrouped / reclassified
wherever necessary, to conform to current year''s classification.