Videocon Industries

As st              As st
                                  30th Sept., 2008   30th Sept., 2007
                                   (Rs. In Million)   (Rs. In Million)
 
 1. Contingent Liabilities 
 not provided for:
 
 a) Letters of Guarantees                45,206.98          30,893.07
 
 b) Letters of Credit opened              1,337.13           3,593.37
 
 c) Customs Penalty - 
    Stayed by High Court                      0.88              11.85
 
 d) Customs Duty demands under dispute      249.49              95.96
   [Amount paid under protest Rs. 0.40
    million (Previous year 
    Rs. 3.94 million)]
 
 e) Income Tax demands under dispute        349.38             102.16
   [Amount paid under protest Rs. NIL
   (Previous year Rs.102.16 million)]
 
 f) Excise Duty and Service Tax demand      275.57             221.81
    under dispute
   [Amount paid under protest Rs.2.87
    million (Previous year 
    Rs. 2.43 million)]
 
 g) Sales Tax demands under dispute         326.36             213.41
   [Amount paid under protest Rs. 23.96
    million (Previous year 
    Rs. 34.20 million)]
 
 h) Others                                   51.42              51.42
 
 i) During the year, Show Cause Notices (SCN) have been served on the
 Operator of the Rawa Oil & Gas Field Joint- Venture for non-payment of
 service tax and education cess on various services for USD 11.92
 million (INR 474.69 million) for the period August 16, 2002 to March
 31, 2006, out of which USD 0.6 Million (INR 24.76 million) relates to
 Rawa Block. The Operator has filed writ petition with Honble High
 Court of Chennai. Further, the Operator has received SCN for the period
 April 1, 2006 to March 31, 2007 for USD 3.43 million (INR 136.59
 million), out of which USD 1.95 million (INR 76.79 million) relates to
 Rawa Block. Detailed reply to this SCN has been filed with Commissioner
 of Service Tax and writ petition has been filed with Honble High Court
 of Chennai challenging service tax demand on some of the services.  The
 Rawa Oil & Gas Field Joint-Venture is contesting the demands and
 believes that its position is likely to be upheld. The ultimate outcome
 of the matter cannot presently be determined and no provision for any
 liability that may result has been made in the accounts as the same is
 subject to agreement by the members of the Joint Venture.  Should it
 ultimately become payable, the Companys share as per the participating
 interest would be upto USD 0.63 million (INR 25.38 million).
 
 j) Rawa Oil & Gas Field Joint-Venture has received a demand notice for
 USD 0.54 million (INR 21.53 million) for delay in payment of cess for
 the period April 2001 to February 2004. The Rawa Oil & Gas Field
 Joint-Venture filed an appeal with Honble High Court of Andhra Pradesh
 and has received an interim stay order against the demand. The Rawa Oil
 & Gas Field Joint-Venture believes that its position is likely to be
 upheld. However, should the liability ultimately arise, the Companys
 share as per the participating interest would be upto USD 0.13 million
 (INR 5.38 million).
 
 k) Disputed Income Tax demand amounting to Rs. 22.29 million in respect
 of certain payment made by Rawa Oil & Gas Field Joint Venture is
 currently pending before the Income Tax Appellate Tribunal. The
 ultimate outcome of the matter cannot presently be determined and no
 provision for any liability that may result has been made in the
 accounts as the same is subject to agreement by the members of the
 Joint Venture.  Should it ultimately become payable, the Companys
 share as per the participating interest would be upto Rs. 5.57 million.
 
 2.  a) There was a dispute regarding (i) deductibility of Oil and
 Natural Gas Corporation Ltd.
 
 (ONGC) Carry while computing the Post Tax Rate of Return (PTRR) under
 the Rawa Production Sharing Contract (PSC); (ii) deductibility of
 provision of Site Restoration Costs for computation of Cost Petroleum
 and PTRR; (iii) deductibility of inventory purchased for computation of
 Cost Petroleum and PTRR; (iv) deductibility of Notional Dividend
 Distribution Tax under the Income-tax Act, 1961 for computation of
 PTRR; and (v) deductibility of Deposits, Advances and Pre-payments made
 for the purpose of Petroleum Operations in the business of Rawa Oil &
 Gas Field for computation of Cost Petroleum and PTRR. The Dispute was
 referred to an International Arbitration in accordance with the
 provisions of the Rawa PSC. Vide the interim award dated 31st March
 2005, the Tribunal has upheld the Companys claims stated in (i) and
 (v) above whereas the claim of the Company stated in (ii), (iii) and
 (iv) above were rejected by the Tribunal. While accepting the Interim
 Award, the Company computed and submitted the calculation on May 31st,
 2005 to Government of India (GOI) indicating the amount payable by the
 Company after applying the said
 
 Arbitration Award at US$ 27.02 million equivalent to Rs. 1,081.88
 million, which was not accepted by GOI and it claimed that the Company
 needs to pay US$ 43.72 million equivalent to Rs. 1,750.55 million and
 interest thereon applying the same Arbitration Award. The Company filed
 a supplementary application on July 7th, 2005 followed by an amendment
 application on August 8th, 2005 with the Arbitration Tribunal with a
 prayer to determine the correct amount payable to GOI as well as to
 determine the interest, if any, payable on the same to GOI. Pending the
 final decision of the Honble Arbitral Tribunal, the Company has
 accounted for and paid the sum of US$ 43.72 million equivalent to Rs.
 1,750.55 million to GOI on ad hoc basis.  The GOI has further filed an
 affidavit on May 10th, 2005 before the Kualalumpur High Court in
 Malaysia challenging the Arbitration Award and praying for setting
 aside the Partial Award dated March 31st, 2005 only in respect of ONGC
 Carry Issue whereas the Company has challenged the jurisdiction of the
 Kualalumpur High Court and therefore the maintainability of such an
 appeal at that Court.
 
 b) There is a dispute between the Company and GOI with regard to the
 computation of interest on delayed payment of profit petroleum to the
 extent of US$ 67,636 equivalent to Rs. 2.71 million. The Company has
 filed an Interim Application on July 7th, 2005 before the Honble
 Arbitral Tribunal for final determination of such amount, pending which
 no provision has been made by the Company.
 
 c) There is a dispute regarding the rate of conversion from US$ into
 Indian rupees applicable to the Nominees of the GOI for the purpose of
 payment of amount of the invoices for sale of the Crude Oil by the
 Company under the Rawa PSC. The dispute was referred to an
 International Arbitration in accordance with the provisions of the Rawa
 PSC. Vide the interim award dated March 31st, 2005, the Tribunal has
 partly upheld the Companys claim. While accepting the Award, the
 Company has worked out and submitted a computation on June 30th, 2005
 to GOI indicating the amount receivable at Rs. 121.43 million being the
 amount short paid by GOI nominees up to June 19th, 2005 and interest
 thereon also calculated up to June 19th, 2005. The Company further vide
 its letter dated August 22nd, 2005 updated its claim indicating the
 total amount receivable from GOI Nominees at Rs.124.42 million being
 the amount short paid by GOI nominees up to July 31st, 2005 and
 interest thereon also calculated up to July 31st, 2005. During the
 year, the Company further updated its claim in this respect vide its
 letter dated April 28th,2008 wherein total amount receivable from GOI
 Nominees is computed at Rs. 349.85 million, being the amount short paid
 by GOI Nominees upto March 31st, 2008 and interest thereon also
 calculated up to March 31st, 2008. The Company had earlier filed a
 supplementary application on July 7th, 2005 and an amendment
 application on August 8th, 2005 with the Arbitration Tribunal with a
 prayer to determine the correct amount payable by GOI/its Nominees as
 well as to determine the interest, if any, payable on the same.  The
 GOI has filed an Original Miscellaneous Petition (OMP) 329 of 2006
 dated July 20th, 2006 before Honble Delhi High Court challenging the
 award in respect of this Dispute. Another OMP 223 of 2006 dated May
 9th, 2006 has been filed by GOIs nominees HPCL and BRPL in the Honble
 Delhi High Court challenging the Partial Award dated March 31st, 2005
 in respect of Conversion/Exchange Rate Matter. Both OMP 223 of 2006 and
 OMP 329 of 2006 are presently sub-judice before the Honble Delhi High
 Court. The GOI nominees continue to make payments at the exchange rate
 without considering directive from the Honble Arbitral Tribunal in
 this regard.
 
 d) GOI has filed OMP 255 of 2006 dated May 30th, 2006 before the
 Honble Delhi High Court under section 9 of the Arbitration and
 Conciliation Act for change of sites of arbitration from London (U.K.)
 to Kualalumpur (Malaysia). GOI has challenged London as the permanent
 seat of arbitration for resolution of disputes under the Rawa PSC and
 has claimed for declaration of Kualalumpur as the permanent seat of
 arbitration.  Whereas the Company honours the award dated November
 15th, 2003 of the Honble Arbitral Tribunal, passed with mutual consent
 of both the GOI and the Company, permanently fixing the seat of
 Arbitration at London in respect of disputes stated in (a),(b) and (c)
 above. The Honble Arbitral Tribunal vide its letter dated March 28th,
 2007 has indicated that it shall continue with the arbitration
 proceedings, in respect of the disputes referred above, after receiving
 the judgement of the Honble Delhi Court in OMP 255 of 2006. Honble
 Delhi High Court has held, vide order dated April 30th, 2008, that it
 has the jurisdiction to hear the matters under dispute arising out of
 arbitration process and that the matter be heard on merits as against
 the Companys contention that the said petition itself was not
 maintainable. The Company has, in this respect, filed Special Leave
 Petition (SLP) (Civil) No. 16371 of 2008 before the Honble Supreme
 Court of India to decide the issue of maintainability of OMP 255 of
 2006. The ultimate outcome of the matter can not be predicted, however,
 the Company believes that its position is likely to be upheld.
 
 e) In respect of the Disputes stated in (a) and (b) above, the GOI had
 vide its letter dated November 3rd, 2006 raised a collective demand of
 Rs. 334.13 Million on account of additional profit petroleum payable
 and interest on delayed payments of profit petroleum calculated up to
 September 30th, 2006 pursuant to the Partial Arbitral Award dated March
 31st, 2005 in the Dispute stated above at (a) and Interim Award dated
 February 12th, 2004 and Partial Award dated December 23rd, 2004 in the
 Dispute stated above at (b). The Company has disputed such demand and
 is instead seeking refund of USD 16.70 Million equivalent to Rs. 668.67
 million already excess paid by the Company to the GOI with interest
 thereon. Subsequently, GOI has in June 2008 through its Nominees
 deducted a further sum of Rs. 372.21 million being its claim of
 additional profit petroleum and interest on delayed payment of profit
 petroleum computed up to April 30th, 2008. Such deduction, also being
 in contravention of the above-referred Arbitral Awards, is disputed by
 the Company.
 
 Any further sum required to be paid or returnable in respect of dispute
 above at (a) to (e) in accordance with the determination of the amount
 by Honble Arbitral Tribunal/ Supreme Court/High Courts in this behalf
 shall be accounted for on the final outcome in this regard.
 
 3.  Estimated amount of contracts remaining to be executed on Capital
 account and not provided for (net of advances) Rs. 528.59 million
 (Previous year Rs. 623.50 million).
 
 4.  Capital Work in Progress includes advances for capital assets Rs.
 3,489.92 million (Previous year Rs. 646.40 million), Interest and other
 finance charges capitalised during the year Rs.544.61 million (Previous
 year Rs. 582.23 million).
 
 5.  A) During the year 2006 the Company had, during the year ended 30th
 September, 2006, issued
 
 a) 90,000 Foreign Currency Convertible Bonds of US$ 1000 each (Bonds)
 due on 7th March, 2011 [outstanding Bonds 41,820 (Previous year
 89,000)].
 
 i) The bonds are convertible at the option of the bondholders at any
 time on and after 20th March, 2006 upto the close of business on 28th
 February, 2011 at a fixed exchange rate of Rs.44.145 per 1 US$ and at
 initial conversion price of Rs.545.24 per share being at premium of 15%
 over the reference share price. The conversion price shall be adjusted
 downwards in the event that the average closing price of shares for 15
 consecutive trading days immediately prior to the reset date is less
 than conversion price, subject to a floor price of Rs. 410.00 as
 adjusted in accordance with the anti-dilution provisions.
 
 ii) The Bonds are redeemable in whole but not in part at the option of
 the company on or after 7th February, 2009 but prior to 28th February,
 2011 if aggregate value on each of 30 consecutive trading days ending
 not earlier than 14 days prior to the date upon which notice of such
 redemption is given was at least 130%. of the accreted principal
 amount.
 
 iii) The Bonds are redeemable at maturity date on 7th March, 2011 at
 116.738% of its principal amount, if not redeemed or converted
 earlier.
 
 b) 105,000 Foreign Currency Convertible Bonds of US$ 1000 each (Bonds)
 due on 25th July 201 ([outstanding Bonds 66,651 (Previous year
 104,901)].
 
 i) The bonds are convertible at the option of the bondholders at any
 time on or after 2nd September, 2006 until 18th July, 2011 except for
 certain closed periods, at a fixed exchange rate of Rs.46.318 per 1 US$
 and at initial conversion price of Rs.511.18 per share being at premium
 of 22% over reference share price. The conversion price shall be
 adjusted downwards in the event that the average closing price of
 shares for 15 consecutive trading days immediately prior to the reset
 date is less than conversion price, subject to a floor price of Rs.
 410.00 as adjusted in accordance with the anti-dilution provisions.
 
 ii) Redeemable in whole but not in part at the option of the Company on
 or after 24th August, 2009, if aggregate value on each of 30
 consecutive trading days ending not earlier than 14 days prior to the
 date upon which notice of such redemption is given was at least 130% of
 the accreted principal amount. Redeemable in whole but not in part at
 the option of the Company on or after 24th August, 2009, if aggregate
 value on each of 30 consecutive trading days ending not earlier than 14
 days prior to the date upon which notice of such redemption is given
 was at least 130% of the accreted principal amount.
 
 iii) Redeemable at maturity date on 25th July, 2011 at 127.65% of its
 principle amount, if not redeemed or converted earlier.  B) During the
 year, the holders of 85,430 Bonds (Previous year 1099 Bonds) have
 exercised their option and have converted the Bonds into Equity Shares
 at the fixed rate of exchange.
 
 6.  The Company has made a provision of Rs.1,349.00 million (Previous
 year Rs.1,231.70 million) towards Current Income Tax, after taking into
 consideration, the benefits admissible under the provisions of the
 Income Tax Act, 1961 and the same is, in the opinion of the Management,
 adequate. The Company has also made a provision of Rs. 1.00 million
 (Previous year Rs.1.00 million) towards Wealth Tax.
 
 7.  The Company has reviewed the fixed assets for Impairment and has
 identified some of the machinery and equipments, which have been
 impaired. Consequently, an amount of Rs. 998.90 million (Previous year
 Rs. NIL) has been assessed as impairment loss and had been recognized
 in the Profit and Loss Account. The releted Deferred Tax Credit of Rs.
 339.52 million (Previous year Rs. NIL) has been included in the
 provision for Deferred Tax in the Profit & Loss Account.
 
 8.  Joint Venture Disclosure:
 
 Unincorporated Joint Ventures:
 
 a) Rawa Oil and Gas Field: The Production Sharing Contract (PSC) in
 respect of Rawa Oil and Gas Field was entered into on 28th October,
 1994 (Effective Date) between the President of India on behalf of the
 Government of India and the contractor parties viz. Oil and Natural Gas
 Corporation Ltd, erstwhile Petrocon India United (now amalgamated with
 the Company), Cairn Energy India Pry Limited and Rawa Oil (Singapore)
 Re. Ltd. The contractor parties have persuant to the PSC, entered into
 a Joint Operating Agreement on the Effective Date. Cairn Energy India
 Pty lit. is the Operator. The participating interest of the Company in
 the said PSC is 25%.
 
 b) The Consortium comprising the Company, Oilex NL Australia, GAIL
 India Ltd, Hindustan Petroleum Corporation Ltd. and Bharat Petroleum
 Corporation Ltd. has been awarded the Block #56, on the Eastern Rank of
 the Central Salt Producing Oil Field in Oman. The Exploration
 Production Sharing Agreement and Joint Operating Agreement have been
 executed on 28th June, 2006.2D and 30 -eismic data are being
 reprocessed in Permian Flank and the exploration drilling in Sama- 1
 well is in progress. Two of the 3 well exploration have been
 successfully drilled.  The Participating interest of the Company in the
 said venture is 25%. The Capital Commitments of the Company based on
 estimated minimum work programme for the year 2008-09 in relation to
 its participating interest is Rs. 492.18 million (Previous year
 Rs.251.04 million).
 
 c) Great Artesian Oil and Gas Ltd (GOG) held 100% of EPP 27 offshore
 Otway Basin, South Australia. The Company, Oilex NL, Gujarat State
 Petroleum Corporation Ltd.  and GOG have entered into Farm-in agreement
 and Joint Operating Agreement in February, 2006.The acquisition of 2D
 Seismic Data reprocessing and drilling of one exploration well was
 carried out. However, due to lack of availability of a rig to undertake
 the drilling, it had been neccessary to seek a suspension/ extension of
 the permit which ended on 24th February, 2007 and was extended upto
 24th August, 2008. PIRSA after discussion with Australian Government
 has recommended that the JV enter into a Good Standing Arrangement and
 spend the penally amount of AU$ 9,253,061 as the minimum expenditure on
 a committed primary term work programme on an Exploration block in
 Federal Australian Waters in next 2 years. For this the JV is required
 to bid successfully. The participating interest of the Company is 20%.
 Pending the Good Sharing Agreement and the bid, the company has
 provided for its share in the aforesaid penalty, of AU$ 1.58 million
 i.e. Rs.62.08 million.
 
 d) The Consortium comprising the Company, Oilex NL, Australia, Gujarat
 State Petroleum Corporation Ltd., Hindustan Petroleum Corporation Ltd.
 and Bharat Petroleum Corporation Ltd. has been awarded a Block WA-388-P
 for a term of 6 years from Government of Western Australia. Joint
 operating Agreement has been signed by all of Joint venture parties in
 March 2007. The acquisition of Seismic Data is in progress. The
 participating interest of the Company was 20%. A Farm-out Agreement has
 been entered into with Sasol Petroleum Australia Ltd. on 12th August,
 2008 whereby, Sasol will carry the JV partners upto certain costs of
 Rose 3D seismic data after the completion of 3D survey in the JPDA
 06-103 Block. In return Sasol will get a 30% participating interest in
 the Block and will takeover from Oilex as operator, after fulfillment
 of all obligations under the said Agreement. The Capital Committments
 of the Company for next three years based on six year work programme is
 Rs. 61.61 million (Previous year Rs. 163.30 million).
 
 The Financial Statements reflect the share of the Company in the assets
 and the liabilities as well as the income and the expenditure of Joint
 Venture Operations on a line by line basis. The Company incorporates
 its share in the operations of the Joint Venture based on statements of
 account received from the Operator. The Company has, in terms of
 Accounting Policy No. A-5 above, recognised abondonment costs based on
 the latest technical assessment of current costs available with the
 Company as cost of producing properties and has provided Depletion
 thereon under Unit of Production method as part of Producing
 Properties in line with Guidance Note on Accounting of Oil and Gas
 Producing Activities issued by the Institute of Chartered Accountants
 of India.  Incorporated jointly controlled Entities:
 
 VB (Brasil) Petroleo Private Limitada (VB Brasil), a 50: 50 joint
 venture company incorporated in Brazil along with Bharat PetroResources
 Limited (BPBL), a wholly owned subsidiary of Bharat Petroleum
 Corporation Ltd., aquired 100% equity of EnCana Brasil Petroleo
 Limitada (name changed to IBV Brasil Petroleo Limitada) from EnCana
 Corporation and 749739 Alberta Limited (the Vendors) under a Share
 Sate Agreement dated September 8, 2007 wherein the effective date was
 agreed as January 1, 2007 (the Effective Date). The acquisition
 transaction was completed by VB Brasil on September 18, 2008 (the
 Closing Date) for a consideration of US$ 165 million plus operating
 costs from the Effective Date till the Closing Date amounting to US$
 117.85 million. IBV Brasil Petroleo Limitada has interests in four
 concessions with ten deep water offshore exploration blocks in Brazil.
 The national oil company of Brazil is the operator in three of the four
 concessions whereas Anadarko Corporation U.S.A. through Its Brazitian
 subsidiary is the operator in one remaining concession. The pre-salt
 exploration programme is continuing in the deep water Campos and
 Espirito Santos basins, with a pre-salt discovery at the Wahoo prospect
 offshore Brazil in the Campos Basin.
 
 9.  The Exceptional items in profit and toss account represents;
 
 a) The amount of interest on delayed payment of profit petroleum and
 royalty on oil and gas of Rs.391.78 million deducted by the Government
 of India in respect of which the application is pending before the
 Honble Arbitral Tribunal for final determination of such amount
 
 b) Exchange rate difference on ECB and FCCB amounting to Rs. 886.32
 million which is only a provision made and may reverse in case, the
 exchange rate moving back to earier levels.
 
 10.  The Company has kept the investment activities separate and
 distinct from the normal business. Consequently, all the income and
 expenditure pertaining to investment activities have been allocated to
 the Investments & Securities Division and the income/lloss) Afteretting
 off the related expenditure has been shown as lncome/(Loss) from
 Investments & Securities Division under Other Income.
 
 11.  Employee Benefits
 
 a) During the year the Company has adopted the revised Accounting
 Standard 15 (AS- 15) Employee Benefits as issued by Institute of
 Chartered Accountants of India.  Pursuant to the adoption the
 difference between the transitional Liability and the labilaty that
 would have been recognised at the same date as per pre-revised AS-15 is
 adjusted against the opening balance of General Reserve.
 
 b) Disclosure
 
 I) Defined Contribution Plans:
 
 Amount of Rs-89.11maon (Previous year Rs. 72.80 million) is recognised
 as an expense and shown under the head Salary, Wages and Employees
 Benefits (Schedule 12) to the Profit and Loss Account.
 
 12.  There are no amounts due to be credited to Investor Education &
 Protection Fund.
 
 13. The Company has prepared the consolidated Financial Statements as
 per Accounting Standard (AS) 21 and accordingly the segment information
 as per AS-17 Segment Reporting has been presented in the Consolidated
 Financial Statements.
 
 14. During the year the Company has changed the accounting policy in
 respect of accounting for provision for Abandonment Cost. According to
 the revised policy, the full eventual estimated liability towards cost
 relating to dismantling, adandoning and restoring well sites and allied
 facilities is recognised as cost of producing property and as liability
 for abandonment cost, based on the latest technical assessment
 available and the same is amortised using the unit of production
 method. Hitherto, the abandonment costs were provided for as liablity
 and not capitalised as producing property.
 
 Consequent to this change in accounting policy, the gross fixed asset
 are higher by Rs 1,004.36 millions, the net fixed assets and the
 current liabilities are higher by Rs 217.24 million. There is no impact
 on the profit for the year due to this change in the accounting policy.
 
 15.  i) Future obligation of the Company for assets taken on all leases
 entered into before 1st April 2001 is Rs. NIL.
 
 ii) Subsequent to 1st April, 2001 the Company has entered into
 operating lease agreements for Cars* to be used by employees for a
 period of 4 years.  The lease rentals charged during the year are Rs.
 1.02 million.
 
 iii) The maximum obligation on long-term non-cancellable operating
 leases entered on or after April 1, 2001 payable as per the rentals
 stated in respective agreements is Rs.NIL