Simbhaoli Sugar Mills

1.  i) Contingent liabilities not provided for:
 
 Claims against the Company not acknowledged as debts Rs. 56.67 lacs
 (previous period Rs. 63.44 lacs).
 
                                                     (Rs. in lacs)
 
 Description                                   As at        As at
                                                Sept.        Sept.
                                            30, 2008     30, 2007
 
 Sales Tax/                                     9.87        17.65
 Trade Tax Act
 
 State Excise Act                               9.26         9.26
 
 Central Excise Act                            11.89        11.89
 
 Others                                        25.65        24.64
 
 Total                                         56.67        63.44
 
 
 All the above matters are subject to legal proceedings in the ordinary
 course of business. The legal proceedings, when ultimately concluded
 will not in the opinion of the management, have a material effect on
 results of operations or financial position of the Company.  (ii)
 Arrears of cumulative preference dividend Rs.  86.40 lacs (previous
 period arrears Rs. 51.84 lacs) for the period from April 2006 to
 September 2008.
 
 2.  Estimated amount of contracts (net of advances) remaining to be
 executed on capital account Rs. 2,445.84 lacs (previous period Rs.
 2,217.15 lacs).
 
 3.  (a) During the year ended March 31, 2006, the Company had issued
 Zero Coupon Foreign Currency Convertible Bonds (FCCB) aggregating to
 US$ 33 million (Rs.14,685 lacs at issue). The bondholders have an
 option to convert these bonds into shares, at the conversion price of
 Rs.  153 (including share premium of Rs. 143) per share {initial
 conversion price of Rs.170 (including share premium of Rs.160) per
 share} with a fixed rate of exchange on conversion of Rs.44.1050 = US $
 1, at any time on or after April 10, 2006 up to February 9, 2011. The
 Company has option to convert principal amount of the bonds between
 March 10, 2007 and March 10, 2011, subject to the satisfaction of
 certain conditions. Unless previously converted, redeemed or
 repurchased and cancelled, the bonds fall due for redemption on March
 11, 2011 at 137.033% of their principal amount.  
 
 (b) The Company on grounds of prudence has decided to provide for
 premium payable on redemption of Foreign Currency Convertible Bonds.
 Accordingly a sum of Rs.  1,355.49 lacs (previous period Rs. 1,304.28
 lacs) determined at the Yield to maturity rate per annum of the
 concerned security has been provided for in the accounts.
 
 4.  Based on the information available with the Company, the balance
 due to Micro and Small Enterprises as defined under the “ The Micro,
 Small and Medium Enterprises Development Act, 2006” is Rs 2.03 lacs
 (previous period Rs. 1.37 lacs).  Further no interest during the year
 has been paid or is payable under the terms of the “ The Micro, Small
 and Medium Enterprises Development Act, 2006”.
 
 5.  Employee Benefits
 
 The Company has during the year adopted Accounting Standard-15 (revised
 2005) “Employee Benefits”. In accordance with the revised accounting
 standard, the transitional benefit amounting to Rs. 57.77 lacs has been
 adjusted in the profit and loss account during the year.  The Company
 has classified the various benefits provided to employees as under:-
 
 a) Defined contribution plans
 
 i) Superannuation fund
 
 ii) Provident fund
 
 During the year, the Company has recognized the following amounts in
 the profits and loss account:
 
                                                    Rs. in lacs
 
 -  Employers Contribution                             219.94
    to Provident Fund 
 
 -  Employers Contribution                              30.56
    to Superannuation Fund 
 
 - Includes Rs. 6.62 lacs for Employers contribution to Provident Fund
 and Rs. 1.02 lacs for Employers contribution to Superannuation Fund
 allocated to Pre-operative expenditure pending allocation in schedule
 6.
 
 b) Defined benefits plans
 
 a) Gratuity
 
 b) Compensated absences Earned Leave/ Sick Leave/ Casual Leave
 
 6.  Revenue expenditure on research and development Rs. 4.54 lacs
 (previous period Rs.2.16 lacs).
 
 7.  The Company has accounted for cane purchases for sugar season
 2007-08 at Rs. 110 per quintal, the rate at which it has made payment
 to the cane growers as per the interim order of the Honble Supreme
 Court, against the State Advised Price of Rs. 125 per quintal fixed by
 the Uttar Pradesh State Government. Necessary adjustments will be made
 in accordance with subsequent orders of the Honble court in the
 matter.
 
 8.  Related Party disclosure under Accounting Standard 18
 
 A.  Name of related party and nature of related party relationship.
 
 Key Management Personnel: Mr.G.M.S.Mann, Mr.Gurpal Singh, Dr.G.S.C.Rao
 and Mr. Sanjay Tapriya.  Relatives of Key management personnel: Mrs.
 Ishwarpreet Kaur (sister of Mr. Gurpal Singh) Mrs.  G.R.Lakshmi (wife
 of Dr.G.S.C.Rao), Mrs. Mamta Tapriya (wife of Mr. Sanjay Tapriya), Mr.
 B.D.Tapriya (father of Mr. Sanjay Tapriya), Mr. Govind Singh Sandhu
 (brother of Mr. Gurpal Singh) and Ms. Gursimran Kaur Mann (daughter of
 Mr. G.M.S.Mann).
 
 Enterprise over which key management personnel exercise significant
 influence: Dholadhar Investments (P) Ltd. (enterprise over which
 Mr.G.M.S.Mann exercises significant influence) and Pritam Singh Sandhu
 Associates Pvt. Ltd (enterprise over which Mr.  Gurpal Singh exercises
 significant influence).
 
 9.  Segment reporting
 
 A.  Business segments: Based on the guiding principles given in
 Accounting Standard AS-17 “Segment Reporting” issued by the Institute
 of Chartered Accountants of India, the Companys business segments
 include: Sugar, Alcohol, Power and Others (Iron products).
 
 B.  Geographical segments: Since the Companies activities/operations
 are primarily within the country and considering the nature of products
 it deals in, the risks and returns are same and as such there is only
 one geographical segment.
 
 C.  Segment accounting policies: In addition to the significant
 accounting polices applicable to the business segments as set out in
 note 1 of schedule 18 “Notes to the Accounts”, the accounting policies
 in relation to segment accounting are as under:
 
 a) Segment revenue and expenses: Joint revenue and expenses of segments
 are allocated amongst them on a reasonable basis. All other segment
 revenue and expenses are directly attributable to the segments.
 
 b) Segment assets and liabilities: Segment assets include all operating
 assets used by a segment and consist principally of operating cash,
 debtors, inventories and fixed assets, net of allowances and provisions
 which are reported as direct offsets in the balance sheet. Segment
 liabilities include all operating liabilities and consist principally
 of creditors and accrued liabilities. Segment assets and liabilities do
 not include deferred income taxes. While most of the assets/liabilities
 can be directly attributed to individual segments, the carrying amount
 of certain assets/liabilities pertaining to two or more segments is
 allocated to the segments on a reasonable basis.
 
 c) Inter segment sales: Inter segment sales between operating segments
 are accounted for at market price.  These transactions are eliminated
 in consolidation.
 
 10.  During the earlier years, the Company, without payment of customs
 duty, had purchased imported raw sugar aggregating 1,11,000 metric
 tones for Rs 12,403.28 lacs for conversion into white sugar. In terms
 of the advance license(s) granted for this purpose by the office of
 Director General of Foreign Trade and subsequent extensions therein,
 the Company is required to complete the export white sugar aggregating
 1,05,619 metric tones by March 18, 2009. As at September 30, 2008
 outstanding export obligation is 29,421 metric tones. The management is
 confident that the export obligation shall be fully met and no loss is
 foreseen in complying with such obligation.
 
 11.  On the basis of future projections taken on record by the Board of
 Directors of the Company as well as growth plans and additional
 capacities set up to produce sugar, ethanol and power, resulting in
 de-risking of the business operations which will augment revenues,
 improved margins in sugar and cogeneration operations and after
 considering turnaround in domestic sugar market scenario as well as
 steps taken by the government to strengthen the industry, the
 Management is confident that there is a virtual certainty that
 sufficient future taxable income will be available against which
 deferred tax asset (net) of Rs 3854.22 lacs will be realized in the
 normal course of Companys business. However, the management, out of
 abundant caution, has decided to restrict recognition of deferred tax
 asset (net) to Rs 1,926.76 lacs, in these accounts.
 
 12.  Pursuant to Revised Accounting Standard 11-“The Effects of Changes
 in Foreign Exchange Rates” and Accounting Standard 16 “Borrowing Cost”
 read together with a recent opinion issued thereon by the Expert
 Advisory Committee of The Institute of Chartered Accountants of India,
 the Company has written back exchange fluctuation gain (net) of Rs.
 1,482.32 lacs (net of exchange differences considered as an adjustment
 to interest cost), abated from construction cost of Capital Projects
 in earlier years and has adjusted the same from “Foreign exchange
 fluctuation” in schedule 17.
 
 13.  The proceeds of Rs. 704.79 Lacs from 31,00,000 warrants/shares
 issued and allotted to specified promoters and Rs. 49.34 Lacs from
 5,94,425 stock options/shares issued and allotted to eligible employees
 of the Company were utilized for capital expenditure/working capital
 requirement of the Company as per the resolutions passed by the
 shareholders in the general meetings.
 
 14.  The figures for the current year are for a period of twelve months
 from October 1, 2007 to September 30, 2008 whereas the corresponding
 previous period figures are for eighteen months from April 1, 2006 to
 September 30, 2007. As such, corresponding figures for the previous
 period are not directly comparable with those of current year.
 
 15.  Previous year figures have been regrouped/ recast wherever
 necessary.