Titan Industries

1. i. Pursuant to the Scheme of amalgamation of Samrat Holdings Limited
 (SHL), Questar Investments Limited (QIL) and Titan Holdings Limited
 (THL) (wholly owned subsidiaries of the Company carrying on investment
 activities) with the Company as sanctioned by the High Courts of Bombay
 and Karnataka, all assets and liabilities have been transferred to and
 vested in the Company retrospectively with effect from April 1, 2007.
 
 ii.  The amalgamation has been accounted for under the “pooling of
 interests” method as prescribed by Accounting Standard (AS) 14 –
 Accounting for Amalgamations notified by the Central Government of
 India under the Companies (Accounting
 
 Standards) Rules, 2006. Accordingly, the assets, liabilities and
 reserves have been recorded at their respective book values in the
 accounts of the Company.
 
 iii. Pursuant to the Scheme, no shares were issued to the amalgamating
 companies, being wholly-owned subsidiaries of the Company. The net
 deficit on amalgamation of Rs. 5610.90 lakhs representing excess of the
 cost of investments in amalgamating companies over their issued share
 capital has been adjusted against General Reserve. After adjustment of
 net deficit on amalgamation of Rs. 5610.90 lakhs, there is a net
 accretion of Rs. 804.78 lakhs to the reserves of the Company.
 
 v.  Loss on sale of investments for the year 2008-09 includes an amount
 of Rs. 2.11 lakhs on sale of Company’s debentures held by amalgamating
 companies prior to the scheme becoming effective.
 
 2.  Estimated amount of contracts remaining to be executed on capital
 account and not provided for is Rs. 2662.96 lakhs (2008: Rs. 1745.76
 lakhs).
 
 3.  As per AS 29, Provisions, Contingent Liabilities and Contingent
 Assets given below are movements in provision for Warranty and Customer
 Loyalty programme.
 
 (a) Provision for warranty – Rs. 239.98 lakhs (2008: Rs. 230.31 lakhs).
 
 The Company gives warranty on all products except jewellery,
 undertaking to repair or replace the items that fail to perform
 satisfactorily during the warranty period. Warranty provisions are made
 for expected future outflows and determined based on past experience.
 No reimbursements are expected. Additional provision made and
 utilised/reversed during the year is Rs. 201.96 lakhs (2008: Rs. 191.24
 lakhs) and Rs. 192.29 lakhs (2008: Rs. 110.20 lakhs) respectively.
 
 (b) Provision for Customer Loyalty programme – Rs. 480.99 lakhs (2008:
 Rs. 430.25 lakhs)
 
 The Company has a scheme of reward points on purchase of certain
 products by customers which can be redeemed at the time of future
 purchases. Provision is made based on past experience. Additional
 provision made and utilised/ reversed during the year is Rs. 296.36
 lakhs (2008: Rs. 430.25 lakhs) and Rs. 245.62 lakhs (2008: Rs. Nil
 lakhs) respectively.
 
 (c) Contingent liabilities not provided for -Rs. 3883.28 lakhs (2008:
 Rs. 4094.83 lakhs) comprising of the following:
 
 Sales Tax – Rs. 323.10 lakhs (2008: Rs. 1176.90 lakhs)
 
 (relating to the applicability of rate of tax, computation of tax
 liability, submission of certain statutory forms)
 
 Customs Duty – Rs. 447.89 lakhs (2008: Rs. 316.94 lakhs)
 
 (relating to compliance with the terms of notification, export
 obligations)
 
 Excise Duty – Rs. 2779.35 lakhs (2008: Rs. 2426.58 lakhs)
 
 (relating to denial of exemption by amending the earlier notification,
 computation of the assessable value, denial of
 
 input credit on service tax)
 
 Income Tax – Rs. 263.25 lakhs (2008: Rs. 113.66 lakhs) (relating to
 disallowance of deductions claimed)
 
 Others – Rs. 69.69 lakhs (2008: Rs. 60.75 lakhs) (relating to
 miscellaneous claims)
 
 The above amounts are based on the notice of demand or the Assessment
 Orders or notification by the relevant authorities, as the case may be,
 and the Company is contesting these claims with the respective
 authorities. Outflows, if any, arising out of these claims would depend
 on the outcome of the decisions of the appellate authorities and the
 Company’s rights for future appeals before the judiciary. No
 reimbursements are expected.
 
 4.  During the year, the Company has received a show cause notice from
 the Excise authorities for Rs. 4983.40 lakhs (excluding interest and
 penalty) towards excise duty on jewellery despatches from September
 2005 to December 2008. The Company has been legally advised that the
 notice is not sustainable.
 
 5.  The Company has decided to close down its two Tanishq boutiques in
 the United States of America (USA) resulting in a charge of Rs. 2901.69
 lakhs to the Profit and Loss Account.
 
 6.  In terms of the Letter of Offer, out of the Rights Issue proceeds
 of Rs. 12678.23 lakhs, Rs. Nil lakhs (2008: Rs. 4362.22 lakhs; 2007:
 Rs. 8316.01 lakhs) have been spent towards the objects of the issue
 during the year, setting up of new showrooms and upgradations and
 expansions of existing showrooms Rs. Nil lakhs (2008: Rs. 1803.12
 lakhs; 2007: Rs. 1711.14 lakhs), replacement, refurbishing & expansion
 of the watch manufacturing facilities Rs. Nil lakhs (2008: Rs. 1041.13
 lakhs; 2007: Rs.  1381.03 lakhs), expansion of jewellery making
 facilities Rs. Nil lakhs (2008: Rs. 492.34 lakhs; 2007: Rs. 466.83
 lakhs), expansion of precision engineering manufacturing facilities Rs.
 Nil lakhs (2008 : Rs. 1025.63 lakhs; 2007: Rs. 539.46 lakhs) and
 redemption of preference shares and general corporate purposes Rs. Nil
 lakhs (2008: Rs. Nil lakhs; 2007: Rs. 4217.55 lakhs).
 
 7.  The 6.75% debentures are redeemable at par at the end of ifve years
 from the dates of allotment on May 12, 2006 and June 9, 2006 and are
 secured by way of legal mortgage on the immovable properties and plant
 and machinery situated at Hosur.
 
 8.  The term loans from banks shown under secured loans include :
 
 a) Loan of Rs. Nil lakhs (2008: Rs. 500.00 lakhs) secured by a first
 charge by way of hypothecation of movable assets (save and except
 current assets and assets taken on lease) and by way of an equitable
 mortgage of immovable properties of the Company, both present and
 future.
 
 b) Loan of Rs. 3332.33 lakhs (2008: Rs. 5000.00 lakhs) secured by a
 first charge by way of hypothecation of movable assets (save and except
 current assets) and secured by way of an equitable mortgage of
 immovable properties of the Company, both present and future.
 
 c) Foreign currency loan of Rs. 2537.00 lakhs (2008: Rs. Nil lakhs) to
 be secured by a first charge over the Company’s present and future
 fixed (movable and immovable) assets.
 
 9.  Non-fund based facilities availed of Rs. 25697.00 lakhs (2008 :
 Rs. 24419.00 lakhs) from banks are secured by a first charge by way of
 hypothecation of current assets including book debts and inventories,
 both present and future.
 
 10.  The security covered under notes 8 and 9 above rank pari passu.
 The security covered under note 10 rank pari passu with the security
 for the cash credit facility.
 
 11.  Exchange gain (net) included in the Profit and Loss Account is Rs.
 97.11 lakhs (2008: Rs. 2557.77 lakhs).
 
 12.  Auditors remuneration comprises of fees for audit of statutory
 accounts Rs. 65.00 lakhs (2008: Rs. 65.00 lakhs), taxation matters Rs.
 30.97 lakhs (2008: Rs. 15.25 lakhs), audit of consolidated accounts Rs.
 7.00 lakhs (2008: Rs. 7.00 lakhs), other services Rs. 23.70 lakhs
 (2008: Rs. 27.75 lakhs) and reimbursement of levies and expenses Rs.
 6.76 lakhs (2008: Rs. 6.29 lakhs).
 
 13.  Excise duty of Rs. 4434.04 lakhs (2008: Rs. 4734.87 lakhs) reduced
 from gross sales in the Profit and Loss Account represents excise duty
 on sale of products.
 
 14.  Rates and taxes include the following :
 
 i) Rs. 88.67 lakhs (2008: Rs. 173.22 lakhs) being the difference in
 excise duty included in opening stock and closing stock of finished
 goods.
 
 ii) Rs. 3212.31 lakhs (2008: Rs. 3647.94 lakhs) being the excise duty
 paid on watch components transferred from Hosur factory to Dehradun,
 Baddi and Roorkee factories.
 
 15.  (a) Interest expense disclosed in the Profit and Loss Account is
 net of Rs. Nil (2008: Rs. 370.82 lakhs) being interest income on loans
 and advances.
 
 (b) Interest on fixed loans amounts to Rs. 1332.56 lakhs (2008: Rs.
 1346.11 lakhs).
 
 16.  The provisions of Industries (Development and Regulation) Act,
 1951, relating to licensed capacity are not applicable to the Company.
 The installed capacity is 12 million watches (2008: 12 million
 watches), 0.32 million jewellery pieces (2008: 0.32 million jewellery
 pieces) and 0.30 million clocks (2008: 0.30 million clocks). The
 installed capacities are as certified by the management and relied upon
 by the auditors without verification, being a technical matter.
 
 17.  The Company produced 88,12,268 watches (2008: 93,79,573 watches)
 sold 82,69,424 watches – Rs. 72662.31 lakhs (2008: 94,22,228 watches -
 Rs. 76694.00 lakhs) and had a Closing Stock of 15,82,982 watches – Rs.
 10318.94 lakhs (2008: 10,40,138 watches - Rs. 6959.22 lakhs, 2007:
 10,82,793 watches – Rs. 8142.39 lakhs).
 
 18.  The Company produced 44,889 clocks (2008: 1,22,728 clocks) sold
 72,378 clocks - Rs. 413.84 lakhs (2008: 1,24,728 clocks - Rs.  1313.31
 lakhs) and had a closing stock of 3,198 clocks – Rs. Nil (2008: 30,687
 clocks – Rs. Nil ; 2007: 32,687 clocks - Rs.11.54 lakhs)
 
 19.  The Company produced 12,43,717 jewellery pieces (2008: 12,17,174
 jewellery pieces), purchased 88,950 jewellery pieces – Rs.24509.05
 lakhs (2008: 82,405 jewellery pieces - Rs. 18137.14 lakhs), sold
 13,64,813 jewellery pieces - Rs. 226503.14 lakhs (2008: 11,38,910
 jewellery pieces - Rs. 171204.16 lakhs) and had a closing stock of
 3,75,632 jewellery pieces - Rs. 75808.74 lakhs (2008: 4,07,778
 jewellery pieces - Rs. 62966.35 lakhs, 2007: 2,47,109 jewellery pieces
 - Rs. 34110.83 lakhs).
 
 20.  The Company produced 8,17,162 coins (2008: 10,22,244 coins), sold
 7,71,953 coins - Rs. 49130.44 lakhs (2008: 10,16,674 coins - Rs.
 31311.27 lakhs) and had a closing stock of 91,813 coins – Rs. 1843.45
 lakhs (2008: 46,604 coins - Rs. 2090.10 lakhs, 2007: 41,034 coins - Rs.
 1994.94 lakhs)
 
 21.  The Company produced 115 machines (2008: 37 machines), capitalised
 1 machine (2008: 2 machines), and sold 114 machines - Rs. 4280.00 lakhs
 (2008: 36 machines – Rs. 2025.61 lakhs), and had a closing stock of Nil
 (2008: Nil machine – Rs. Nil lakhs; 2007: 1 machine – Rs. 114.87
 lakhs).
 
 22.  The Company purchased 15,79,562 watches - Rs. 8284.18 lakhs (2008:
 10,93,343 watches – Rs. 5630.59 lakhs), sold 14,24,498 watches - Rs.
 16337.02 lakhs (2008: 8,64,223 watches - Rs. 10270.14 lakhs) and had a
 closing stock of 4,99,112 watches – Rs. 4310.18 lakhs (2008: 3,44,048
 watches - Rs. 2553.05 lakhs; 2007: 1,14,928 watches - Rs. 853.34
 lakhs).
 
 23.  The Company purchased Nil clocks (2008: Nil), sold 2,478 clocks –
 Rs. 0.67 lakhs (2008: 418 clocks – Rs. 0.01 lakhs) and had a closing
 stock of 1112 clocks – Rs. Nil (2008: 3,590 clocks – Rs. Nil; 2007 -
 4,008 clocks – Rs. Nil).
 
 24.  The Company purchased 9,59,733 eyewear products – Rs. 2112.33
 lakhs (2008: 5,65,459 eyewear products – Rs.1436.51 lakhs), sold
 8,53,597 eyewear products – Rs. 6484.76 lakhs (2008 : 5,72,138 eyewear
 products – Rs. 4052.66 lakhs) and had a closing stock of 2,74,498
 eyewear products – Rs. 947.15 lakhs (2008 : 1,68,362 eyewear products -
 Rs. 619.70 lakhs; 2007 : 1,75,041 eyewear products - Rs. 675.91 lakhs).
 
 Eyewear products include sunglasses, frames, ready readers and lenses.
 
 25.  Sales includes sale of scrap Rs. 576.17 lakhs (2008: Rs. 593.31
 lakhs), sale of accessories Rs. 7313.84 lakhs (2008: Rs. 5824.44
 lakhs), sale of tools and components Rs. 593.14 lakhs (2008 : Rs.
 642.81 lakhs), sale of gold Rs. 4929.37 lakhs (2008: 829.07 lakhs),
 sale of precious stones Rs. 1568.43 lakhs (2008 : Rs. 1457.09 lakhs),
 income from services provided Rs. 254.02 lakhs (2008 : Rs. 181.09
 lakhs) and is net of turnover based commission of Rs. 7246.03 lakhs
 (2008 : Rs. 5195.49 lakhs) and all discounts, including cash discount
 of Rs. 591.14 lakhs (2008 : Rs. 515.18 lakhs).
 
 26.  Revenue expenditure directly attributable to research and
 development is estimated at Rs. 294.17 Lakhs (2008: Rs. 291.67 lakhs).
 
 27.  In the current year, the Company revised the estimated useful life
 of Furniture & Fixtures from 15 years to 5 years which has resulted in
 an additional depreciation charge of Rs. 789.82 lakhs.
 
 28.  (a) Sundry creditors include Rs. Nil lakhs (2008: Rs. 33.91 lakhs)
 towards liability for lease of vehicles which falls due later than one
 year.
 
 (b) Current liabilities do not include any amount to be credited to
 Investor Education and Protection Fund except where there are pending
 legal cases amounting to Rs. 0.29 lakhs (2008: Rs. 0.10 lakhs) and
 therefore, amounts relating to the same could not be transferred.