(a) Basis of preparation
The financial statements of the Company have been prepared under the
historical cost convention on an accrual basis of accounting in
accordance with the Generally Accepted Accounting Principles in India
to comply with the Accounting Standards prescribed under Section 133 of
the Companies Act, 2013 and relevant provisions of the Companies Act,
2013 (the 2013 Act).
(b) Use of estimates
The preparation of financial statements requires management to make
judgments, estimates and assumptions, that affect the application of
accounting policies and the reported amounts of assets, liabilities,
income, expenses and disclosures of contingent liabilities at the date
of these financial statements. Actual results may differ from these
estimates. Estimates and underlying assumptions are reviewed at each
balance sheet date. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and future periods affected.
(c) Revenue recognition
The Company recognises revenues on the sale of products, net of
discounts and sales incentives, when the products are delivered to the
dealer / customer or when delivered to the carrier for export sales,
which is when risks and rewards of ownership pass to the dealer /
Sales include income from services and exchange fluctuations relating
to export receivables. Sales include export and other recurring and
non-recurring incentives from the Government at the national and state
levels. Sale of products is presented gross of excise duty where
applicable, and net of other indirect taxes.
Revenues are recognised when collectability of the resulting
receivables is reasonably assured.
Dividend from investments is recognized when the right to receive the
payment is established and when no significant uncertainty as to
measurability or collectability exists.
Interest income is recognized on the time basis determined by the
amount outstanding and the rate applicable and where no significant
uncertainty as to measurability or collectability exists.
(d) Depreciation and amortisation
(i) Depreciation is provided on the Straight Line Method (SLM) over the
estimated useful lives of the assets considering the nature, estimated
usage, operating conditions, past history of replacement, anticipated
technological changes, manufacturers warranties and maintenance
support. Taking into account these factors, the Company has decided to
retain the useful life hitherto adopted for various categories of fixed
assets, which are different from those prescribed in Schedule II
of the Act. Estimated useful lives of assets are as follows :
Type of Asset Estimated useful life
- Leasehold Land Amortised over the period of the lease
- Buildings, Roads, Bridges and culverts 4 to 60 years
- Plant, machinery and equipment 8 to 20 years
- Computers and other IT assets 4 to 6 years -Vehicles 4 to 10 years
- Furniture, fixture and office appliances 5 to 15 years
- Technical Know-how 5 to 6 years
- Computer software 4 years
- Water system and sanitation 20 years
- Assets taken on lease are amortised over the period of lease 10 years
(ii) Product development costs are amortised over a period of upto 120
months for New Generation vehicles and powertrains on the basis of
higher of the volumes between planned and actuals and on a straight
line method over a period of 36 months for Vehicle Variants,
Derivatives and other Regulatory Projects.
(iii) In respect of assets whose useful life has been revised, the
unamortised depreciable amount has been charged over the revised
remaining useful life.
(iv) Depreciation is not recorded on capital work-in-progress until
construction and installation are complete and asset is ready for its
(v) Capital assets, the ownership of which doesn''t vest with the
Company, other than leased assets, are depreciated over the estimated
period of their utility or five years, whichever is less.
(e) Fixed assets
(i) Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation / amortization and accumulated impairment, if
(ii) Product development cost incurred on new vehicle platforms,
engines, transmission and new products are recognised as fixed assets,
when feasibility has been established, the Company has committed
technical, financial and other resources to complete the development
and it is probable that the asset will generate probable future benefits.
(iii) Cost includes purchase price, taxes and duties, labour cost and
directly attributable overhead expenditure for self constructed assets
incurred up to the date the asset is ready for its intended use.
Borrowing cost incurred for qualifying assets is capitalised up to the
date the asset is ready for intended use, based on borrowings incurred
specifically for financing the asset or the weighted average rate of
all other borrowings, if no specific borrowings have been incurred for
the asset. The cost of acquisition is further adjusted for exchange
differences relating to long term foreign currency borrowings
attributable to the acquisition of depreciable asset w.e.f April 1,
(iv) Tangible assets and Software not exceeding Rs.25,000, and product
development costs relating to minor product enhancements, facelifts and
upgrades, are charged off to the Statement of Profit and Loss as and
At each Balance Sheet date, the Company assesses whether there is any
indication that the fixed assets with finite lives may be impaired.
If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment, if any.
Where it is not possible to estimate the recoverable amount of
individual asset, the Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs. As at March 31, 2016
none of the fixed assets were considered impaired.
(i) Finance lease
Assets acquired under finance leases are recognised as an asset and a
liability at the commencement of the lease, at the lower of the fair
value of the assets and the present value of minimum lease payments.
The finance expense is allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Assets given under finance leases are
recognised as receivables at an amount equal to the net investment in
the lease and the finance income is based on a constant rate of return
on the outstanding net investment.
(ii) Operating lease
Leases other than finance lease, are operating leases, and the leased
assets are not recognised on the Company''s Balance Sheet. Payments /
rental income under operating leases are recognised in the Statement of
Profit and Loss on a straight-line basis over the term of the lease.
(h) Transactions in foreign currencies and accounting of derivatives
(i) Exchange differences
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of the transaction. Foreign currency monetary
assets and liabilities are translated at year end exchange rates.
(1) Exchange differences arising on settlement of transactions and
translation of monetary items other than those covered by (2) below are
recognized as income or expense in the year in which they arise.
Exchange differences considered as borrowing cost are capitalized to
the extent these relate to the acquisition / construction of qualifying
assets and the balance amount is recognized in the Statement of Profit
(2) Exchange differences relating to long term foreign currency
monetary assets / liabilities are accounted for with effect from April
1, 2007 in the following manner:
- Differences relating to borrowings attributable to the acquisition
of depreciable capital assets are added to / deducted from the cost of
such capital assets.
- Other differences were accumulated in Foreign Currency Monetary Item
Translation Difference Account and amortized over the period,
beginning April 1, 2007 or date of inception of such item, as
applicable, and ending on March 31, 2011 or the date of its maturity,
whichever was earlier.
- Pursuant to notification issued by the Ministry of Corporate Affairs
on December 29, 2011, the exchange differences on long term
foreign currency monetary items (other than those relating to
acquisition of depreciable assets) are amortised over the period till
the date of maturity or March 31, 2020, whichever is earlier.
(ii) Hedge accounting
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. With effect from April 1, 2008, the
Company designates such forward contracts in a cash flow hedging
relationship by applying the hedge accounting principles set out in
Accounting Standard 30- Financial Instruments: Recognition and
These forward contracts are stated at fair value at each reporting
date. Changes in the fair value of these forward and option contracts
that are designated and effective as hedges of future cash flows are
recognized directly in Hedging Reserve Account under Reserves and
Surplus, net of applicable deferred income taxes and the ineffective
portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in Hedging Reserve Account are reclassified to
Profit and Loss in the periods during which the forecasted transaction
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. For forecasted transactions, any cumulative gain or loss
on the hedging instrument recognised in Hedging Reserve Account is
retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognised in Hedging Reserve Account is
immediately transferred to the Profit and Loss Statement. Foreign
currency options and other derivatives are stated at fair value as at
the year end with changes in fair value recognized in the Statement of
Profit and Loss.
(iii) Premium or discount on forward contracts other than those covered
in (ii) above is amortised over the life of such contracts and is
recognised as income or expense.
(i) Product warranty expenses
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise - being typically
up to 3 to 4 years.
Inventories are valued at the lower of cost and net realisable value.
Cost of raw materials and consumables are ascertained on a moving
weighted average / monthly moving weighted average basis. Cost,
including variable and fixed overheads, are allocated to
work-in-progress, stock-in-trade and finished goods determined on full
absorption cost basis. Net realisable value is estimated selling price
in the ordinary course of business less estimated cost of completion
and selling expenses.
(k) Employee benefits
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The Company
makes annual contributions to gratuity fund established as trust. The
Company accounts for the liability for gratuity benefits payable in
future based on an independent actuarial valuation carried out at each
Balance Sheet date using the projected unit credit method.
The Company has two superannuation plans, a defined benefit plan and
a defined contribution plan. An eligible employee on April 1, 1996
could elect to be a member of either plan.
Employees who are members of the defined benefit superannuation plan
are entitled to benefits depending on the years of service and salary
drawn. The monthly pension benefits after retirement range from 0.75%
to 2% of the annual basic salary for each year of service. The Company
accounts for the liability for superannuation benefits payable in
future under the plan based on an independent actuarial valuation as at
Balance Sheet date. With effect from April 1, 2003, this plan was
amended and benefits earned by covered employees have been protected
as at March 31, 2003. Employees covered by this plan are prospectively
entitled to benefits computed on a basis that ensures that the annual
cost of providing the pension benefits would not exceed 15% of salary.
During the year 2014-15, the employees covered by this plan were given
a one time option to exit from the plan prospectively. Further, the
employees who opted for exit were given a one time option to withdraw
accumulated balances from the superannuation plan.
The Company maintains a separate irrevocable trust for employees
covered and entitled to benefits. The Company contributes up to 15% or
R1,00,000 whichever is lower of the eligible employees'' salary to the
trust every year. The Company recognizes such contributions as an
expense when incurred and has no further obligation beyond this
(iii) Bhavishya Kalyan Yojana (BKY)
Bhavishya Kalyan Yojana is an unfunded defined benefit plan for
employees of the Company. The benefits of the plan include pension in
certain cases, payable up to the date of normal superannuation had the
employee been in service, to an eligible employee at the time of death
or permanent disablement, while in service, either as a result of an
injury or as certified by the appropriate authority. The monthly
payment to dependents of the deceased / disabled employee under the
plan equals 50% of the salary drawn at the time of death or accident or
a specified amount, whichever is higher. The Company accounts for the
liability for BKY benefits payable in future based on an independent
actuarial valuation as at the Balance Sheet date. (iv) Post-retirement
Under this scheme, employees of the Company receive medical benefits
subject to certain limits of amount, periods after retirement and types
of benefits, depending on their grade and location at the time of
retirement. Employees separated from the Company as part of Early
Separation Scheme, on medical grounds or due to permanent disablement
are also covered under the scheme. The liability for post-retirement
medical scheme is based on an independent actuarial valuation as at the
Balance Sheet date.
(v) Provident fund
The eligible employees of the Company are entitled to receive benefits
in respect of provident fund, a defined contribution plan, in which
both employees and the Company make monthly contributions at a specified
percentage of the covered employees'' salary (currently 12% of
employees'' salary). The contributions as specified under the law are
made to the provident fund and pension fund set up as irrevocable trust
by the Company . The Company is generally liable for annual
contributions and any shortfall in the fund assets based on the
government specified minimum rates of return or pension and recognises
such contributions and shortfall, if any, as an expense in the year
(vi) Compensated absences
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits, for future encashment. The liability
is provided based on the number of days of unutilised leave at each
balance sheet date on the basis of an independent actuarial valuation.
Long term investments are stated at cost less other than temporary
diminution in value, if any. Current investments are stated at lower of
cost and fair value.
Fair value of investments in mutual funds are determined on a portfolio
(m) Income taxes
Tax expense comprises current and deferred taxes.
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Current tax is net of credit for entitlement for Minimum Alternative
Deferred tax is recognised, on timing differences, being the difference
between taxable income and accounting income that originate in
one period and are capable of reversal in one or more subsequent
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other deferred tax assets are recognised if there is
reasonable certainity that there will be sufficient future taxable
income to realize such assets.
Deferred tax assets and liabilities are measured based on the tax rates
that are expected to apply in the period when asset is realised or the
liability is settled, based on tax rates and tax laws that have been
enacted or substantively enacted by the balance sheet date.
(n) Borrowing Costs
Fees towards structuring/arrangements and underwriting and other
incidental costs incurred in connection with borrowings are amortised
over the period of the loan.
(o) Liabilities and contingent liabilities
The company records a liability for any claims where a potential loss
is probable and capable of being estimated and discloses such matters
in its financial statements, if material. For potential losses that
are considered possible, but not probable, the Company provides
disclosure in the financial statements but does not record a liability
in its accounts unless the loss becomes probable.
(p) Business segments
The Company is engaged mainly in the business of automobile products
consisting of all types of commercial and passenger vehicles including
financing of the vehicles sold by the Company. These, in the context
of Accounting Standard 17 on Segment Reporting are considered to
constitute one single primary segment. Further, there is no reportable
secondary segment i.e. Geographical Segment.
(h) Rights, preferences and restrictions attached to shares :
(i) Ordinary shares and ''A'' Ordinary shares, both of Rs.2 each :
- The Company has two classes of shares - the Ordinary shares and the
''A'' Ordinary shares both ofRs.2 each (together referred to as shares).
In respect of every Ordinary share (whether fully or partly paid),
voting rights shall be in the same proportion as the capital paid up on
such Ordinary share bears to the total paid up Ordinary share capital
of the Company. In case of every ''A'' Ordinary share, if any resolution
is put to vote on a poll or by postal ballot at any general meeting of
shareholders, the holder shall be entitled to one vote for every ten
''A'' Ordinary s as per the terms of its issue and if a resolution is put
to vote on a show of hands, the holder of ''A Ordinary shares shall be
entitled to the same number of votes as available to holders of
- The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
Further, the Board of Directors may also declare an interim dividend.
The holders of ''A Ordinary shares shall be entitled to receive dividend
for each financial year at five percentage point more than the
aggregate rate of dividend declared on Ordinary shares for that financial
- In the event of liquidation, the shareholders are eligible to receive
the remaining assets of the Company after distribution of all
preferential amounts, in proportion to their shareholdings.
(ii) American Depositary Shares (ADSs) and Global Depositary Shares
- Each ADS and GDS underlying the ADR and GDR respectively represents
five Ordinary shares of Rs.2 each. A holder of ADS and GDS is not
entitled to attend or vote at shareholders meetings. An ADS holder is
entitled to issue voting instructions to the Depositary with respect to
the Ordinary shares represented by ADSs only in accordance with the
provisions of the Company''s ADSs deposit agreement and Indian Law. The
depositary for the ADSs and GDSs shall exercise voting rights in
respect of the deposited shares by issue of an appropriate proxy or
power of attorney in terms of the respective deposit agreements.
- Shares issued upon conversion of ADSs and GDSs will rank pari passu
with the existing Ordinary shares of Rs.2 each in all respects including
entitlement of the dividend declared.
(j) Information regarding issue of shares in the last five years
(a) The Company has not issued any shares without payment being
received in cash.
(b) There has been no issue of bonus shares.
(c) The Company has not undertaken any buy-back of shares.
(k) The Company allotted 15,04,90,480 Ordinary shares (including
3,20,49,820 shares underlying the ADRs) of Rs.2 each at a premium of R448
per share, aggregating Rs.6,772.07 crores and 2,65,09,759 ''A'' Ordinary
shares of Rs.2 each at a premium of Rs.269 per share, aggregating
Rs.718.42 crores pursuant to the Rights issue. 1,54,279 Ordinary shares
and 20,531 ''A'' Ordinary shares have been kept in abeyance.
(l) The entitlements to 6,38,749 Ordinary shares of Rs.2 each (as at
March 31, 2015 : 4,84,470 Ordinary shares of Rs.2 each) and 2,60,101 ''A''
Ordinary shares of Rs.2 each (as at March 31, 2015: 2,39,570 ''A'' Ordinary
shares of Rs.2 each) are subject matter of various suits filed in the
courts / forums by third parties for which final order is awaited and
hence kept in abeyance.
I. Information regarding long term borrowings
(i) Nature of security (on loans including interest accrued thereon) :
(a) Rated, Listed, Secured, 9.95% Coupon, Non-Convertible Debentures
amounting to Rs.200 crores and 10.25% Coupon, Non-Convertible Debentures
amounting to Rs.500 crores are secured by a pari passu charge by way of
an English mortgage of the Company''s freehold land together with
immovable properties, plant and machinery and other movable assets
(excluding stock and book debts) situated at Sanand in the State of
(b) Buyers line of credit from banks are secured by hypothecation of
existing current assets of the Company viz. stock of raw materials,
stock in process, semi-finished goods, stores and spares not relating
to plant and machinery (consumable stores and spares), bills receivable
and book debts including receivable from hire purchase / leasing and
all other movable current assets except cash and bank balances, loans
and advances of the Company both present and future. Classified under
other current liabilities being maturity before March 31, 2017.
(c) The term loan of Rs.541.51 crores is due for repayment from the
quarter ending March 31, 2033 to quarter ending March 31, 2036, along
with simple interest at the rate of 0.10% p.a. The loan is secured by a
second and subservient charge (creation of charge is under process)
over Company''s freehold land together with immovable properties, plant
and machinery and other movable assets (excluding stock and book debts)
situated at Sanand plant in the State of Gujarat.
The term loan of Rs.11.15 crores is due for repayment in the quarter
ending June 30, 2030, along with a simple interest of 0.10% p.a. The
loan is secured by bank guarantee as per the terms of the agreement.
II. Information regarding short term borrowings
Loans, cash credits, overdrafts and buyers line of credit from banks
are secured by hypothecation of existing current assets of the Company
viz. stock of raw materials, stock in process, semi-finished goods,
stores and spares not relating to plant and machinery (consumable
stores and spares), bills receivable and book debts including
receivable from hire purchase / leasing and all other moveable current
assets except cash and bank balances, loans and advances of the Company
both present and future.