1. General Information
Welspun India Limited (WIL) is a leading manufacturer of wide range of
home textile products'' mainly terry towels'' bed linen products and
rugs. The Company is a public limited company and is listed on the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
(a) Rights'' preferences and restrictions attached to shares Equity
The company has one class of equity shares having a par value of Rs.10
per share. Each shareholder is eligible for one vote per share held.
The dividend'' in case proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting''
except in case of interim dividend. In the event of liquidation'' the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts'' in proportion
to their shareholding.
Preference Shares :
0% Redeemable Preference Shares of Rs.100 each fully paid up issued
pursuant to High Court order were redeemable at par on or after
repayment of all outstanding term liabilities and preference shares
held by banks and financial institutions as on April 1'' 2000 alongwith
interest and dividend thereon.
I Defined Benefit Plan Contribution to Gratuity Fund
The Company operates a gratuity plan through the Welspun India Limited
Employees Gratuity Trust. Every employee is entitled to a benefit
equivalent to fifteen days salary last drawn for each completed year of
service in line with the Payment of Gratuity Act'' 1972. The same is
payable at the time of separation from the Company or retirement''
whichever is earlier.
II Other Employee Benefit
The liability for leave entitlement and compensated absences as at year
end is Rs. 38.24 million (March 31'' 2011: Rs. 65.12 million).
2 Contingent Liabilities
March As At March
Deicription 31'' 2012 31'' 2011
Excise'' Customs and
Service Tax Matters 677.48 492.28
Stamp Duty Matter 4.46 4.46
Sales Tax 36.44 10.61
(Refer Note 35) 8''891.90 8''738.52
Bank Guarantees 166.89 220.16
Claims against Company not
acknowledged as debts 5.51 7.85
3 The Company has issued corporate guarantee aggregating Rs. 8''891.90
million (March 31''2011: Rs. 8''738.52 million) on behalf of Welspun
Retail Limited (WRL)'' Welspun USA Inc. (''WUSA'')'' Welspun Home Textiles
UK limited (''WHTL'')'' Welspun Captive Power Generation Limited (WCPGL)
and CHT Holdings Limited (''CHTHL'').
4 During the previous year'' the Company had recognised deferred tax
assets aggregating Rs. 296.58 million on the incremental unabsorbed
Income-tax depreciation arising out of its treatment of certain Excise
and Value Added Tax incentives as ''capital receipts'' for income tax
purposes based on the judgment in re Commissioner of Income Tax'' Mumbai
v/s. Reliance Industries Limited of the Honourable High Court of
Judicature at Bombay. The said case was heard by the apex court and the
impugned order was set aside and remanded back to High Court. If the
final decision in the matter is eventually decided against Welspun
India Limited'' then the carrying value ofthe Minimum Alternate Tax
Credit Entitlement assets at the year end could be significantly
5 The Board of Directors at its meeting held on May 7'' 2012 had''
subject to approval of the Stock Exchanges'' sanction of the Honourable
High Court of Gujarat and other approvals as may be necessary'' approved
a composite scheme of arrangement (the Scheme) between Welspun Global
Brands Limited (WGBL) (Transferor Company)'' the Company (First
Transferee Company) and Welspun Retail Limited (WRL- Second
According to the Scheme'' the WGBL will be merged into the Company as a
going concern'' the marketing business undertaking of the Company will
be hived off to WRL and certain overseas investments of the Company
would be transferred to WRL. Consequently'' WGBL shall be dissolved
without winding up and the name of WRL would be changed to Welspun
Global Brands Limited.
Appointed Date for the Scheme was April 1'' 2011 and the stakeholders of
all the concerned companies have already approved the Scheme in the
Court Convened meeting held on August 4'' 2012.
Subsequently'' the High Court of Gujarat at Ahmedabad by its order dated
November 26'' 2012 has approved the Scheme. The order has been filed
with the Registrar of Companies on December 7'' 2012 (effective date
ofthe scheme). As per the Scheme'' assets and liabilities of WGBL were
transferred at book values to the Company with effect from the
appointed date (April 1'' 2011). Accordingly'' net assets of WGBL
aggregating Rs. 1''531.28 million were transferred to the Company.
Further'' as per the scheme'' the Company will issue one equity share of
Rs. 10 each credited as fully paid up to the shareholders of WGBL for
every one equity share held by them in WGBL. Accordingly'' Rs. 104.75
million pertaining to 10''475''496 equity shares of Rs. 10 each to be
allotted to the shareholders of WGBL has been included in Share
Suspense Account. Rs. 1''426.54 million being the excess of net assets
transferred over the value of consideration has been accounted as
Also'' pursuant to the Scheme'' the authorised share capital of the
Company stood increased from Rs. 1''300''000''000 consisting of
125''000''000 equity shares of Rs. 10 each and 500''000 preference shares
of Rs.100 each to Rs. 1''555''000''000 consisting of 155''500''000 equity
shares of Rs. 10 each and without any further act'' instrument or deed.
Following the amalgamation'' the marketing business undertaking of
Welspun India Limited has been hived off as a going concern to WRL on
April 1'' 2011 for a purchase consideration of 1''050''153 0% Redeemable
Preference Shares of Rs. 10 each to be issued at a premium of Rs 990
and Rs 246 in cash. The assets and liabilities of the marketing
business undertaking have been transferred to WRL at book values for an
equivalent amount of consideration. Consequently'' there is no profit/
loss arising on such transfer.
Further'' certain investments of Welspun India Limited by way of shares
of Welspun USA Inc'' Welspun Holdings Private Limited and Welspun
Mauritius Enterprises Limited have been transferred to WRL for a
purchase consideration of 1''339''422 0% Redeemable Preference Shares of
Rs. 10 each to be issued at a premium of Rs. 990 per share and cash of
Rs. 343. These investments have been transferred to WRL at book values
for an equivalent amount of consideration. Consequently'' there is no
profit/ loss arising on such transfer.
Welspun Retail Limited will be applying to the Registrar of Companies
for a change in its name to Welspun Global Brands Limited.
As WGBL has merged into the Company on April 1'' 2011 and the marketing
business undertaking of the Company has been hived off on the same day''
there is no impact on the Statement of Profit and Loss on account of
the scheme. Accordingly'' disclosures under Accounting Standard 24:
Discontinuing Operations are not required to be given.
6 As at March 31'' 2012'' the Company has inadvertently made certain
investments aggregating Rs. 1''197.29 million in the bonds issued by
certain public sector undertakings without obtaining prior approval of
the shareholders by way of a special resolution as required under
Section 372A of the Companies Act'' 1956. Subsequent to the year-end
these investments were sold. Further'' the Company has filed a suo motu
application to the Company Law Board for the compounding of this
offence and adjudication by the Company Law Board is pending.
7 The Company has provided Rs. 81.79 million towards
other-than-temporary diminution in the value of Investment in Welspun
Holdings Private Limited'' Cyprus (WHPL). The diminution in value of
investment is primarily due to losses made by one of its operating
subsidiaries'' Welspun UK Limited and losses arising on sale of its
other operating subsidiary Welspun Sorema Europe S.A.
8 In the meeting of the Board of Directors of the Company held on May
11'' 2011'' it was resolved that the business of Welspun Mexico S.A. de
C.V. (a wholly-owned downstream subsidiary of Welspun AG which'' in
turn'' is a wholly owned subsidiary of the Company)'' involved in
manufacturing decorative bedding products for Welspun AG'' shall be
re-organised in view of the adverse law and order conditions in the
region in which the manufacturing premises of Welspun Mexico S.A. de
C.V is situated which has severely impacted its business prospects and
its ability to contain the sustained losses and reverse the accumulated
losses. Further'' there has been breach of the lease agreement by the
landlord necessitating the vacating of the premises. The aforesaid
business reorganization involves exiting the current manufacturing
premises of Welspun Mexico S.A. de C.V. and settng up trading
activities only in new premises'' disposing of the assets and
discontinuing the employment of the majority of its employees. The
Board of Directors further resolved in the aforesaid meeting that the
consequential impairment in the value of the Company''s investments in
Welspun AG'' and loans given to Welspun AG'' shall be determined and
recognized. Accordingly'' a provision of Rs. 739.12 million towards
diminution in the value of investments in Welspun AG'' and a provision
of Rs 937.91 million towards the outstanding loans and advances given
to Welspun AG as at March 31''2011 was recognised and disclosed in the
Statement of Profit and Loss for the year ended March 31'' 2011. During
the year'' the Company has made incremental provision for the aforesaid
doubtful loans arising out of the restatement at the year end of the
foreign currency balance which was fully provided as at March 31'' 2011.
The provision aggregating Rs. 131.84 million has been included in
extraordinary items and the corresponding gain on restatement is
included in Other Income. Further'' extraordinary items for the year
ended March 31'' 2012 also includes provision for new loan of Rs. 152.51
million given to Welspun AG during the year ended March 31'' 2012.
9 Details of Employees Stock Options
On June 30'' 2009'' the Company issued Employee Stock Options (ESOP)
under the Employee Stock Options Scheme (the Scheme) to employees of
the Company with a right to subscribe to equity shares (New Options)
at a price of Rs. 35.60 per equity share (closing market price as on
June 30'' 2009) with an option to existing grantees'' who were granted
options on May 17'' 2006 (Old Options)'' to receive New Options on
surrender of Old Options. All employees holding Old Options on June 30''
2009 chose to surrender the Old Options. The salient features of the
Scheme are as under:
(i) Vesting : Options to vest over a period of four years from the date
of their grants as under:
- 20% of the Options granted to vest at each of the 1st and 2nd
anniversaries of the date of grant.
- 30% of the Options granted to vest at each of the 3rd and 4th
anniversaries of the date of grant.
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method as permitted
by the SEBI Guidelines and the Guidance Note on Accounting for Employee
Share Based Payments issued by the Institute of Chartered Accountants
of India in respect of stock options granted. The value of underlying
share has been determined by an independent valuer. Since'' on the date
of grant of option'' quoted market price of the underlying equity shares
of the Company was equal to the exercise price of an option'' no expense
or liability arising from the Scheme has been recognised.
The Company''s earnings per share would have been as under'' had the
compensation cost for employees stock options been recognised based on
the fair value at the date of grant in accordance with Black Scholes''
* There is no increase in number of shares in respect of outstanding
employee stock options for the purpose of calculation of diluted
earnings per share as the average market value of the shares for the
last six months is lower than the exercise price.
# Includes 10''475''496 shares of Rs. 10 each to be issued to
shareholders of erstwhile Welspun Global Brands Limited'' pursuant to
the Scheme of Arrangement with effect from April 1'' 2011.
10 Segment Information forthe year ended March 31'' 2012.
(i) Information about Primary BusinessSegment
The Company is exclusively engaged in the business of Home Textiles
which'' in the context of Accounting Standard 17 on Segment Reporting''
issued by the Institute of Chartered Accountant of India'' is considered
to constitute a single primary segment. Thus'' the segment revenue''
segment results'' total carrying amount of segment assets'' total
carrying amount of segment liabilities'' total cost incurred to acquire
segment assets'' total amount of charge for depreciation during the
period are all as reflected in the financial statements for the year
ended March 31''2012 and as on that date.
(a) The Segment revenue in the geographical segments considered for
disclosure for March 2011 are as follows :
- Revenue within India includes sales to customers located within India
and earnings in India.
- Revenue outside India includes sales to customers located outside
India'' earnings outside India and export benefits on sales made to
customers located outside India.
(b) Segment revenue and assets include the respective amounts
identified to each of the segments and amounts allocated on a
(c) The Company is exclusively engaged in sales to customers located in
India. Consequently the Company does not have separate reportable
geographical segments for March 2012.
Where the Company is a lessee :
The Company has taken various residential'' office premises'' godowns''
equipment and vehicles under operating lease agreements that are
renewable on a periodic basis at the option of both the lessor and the
lessee. The initial tenure of lease is generally for eleven months to
The aggregate rental expenses of all the operating leases for the year
are Rs. 76.30 million (Previous Year: Rs. 94.32 million).
12 Interest in Joint Venture
a. The Company has accounted the investments in Joint Venture in
Welspun ZucchiTextiles Limited (WZTL) in accordance with Accounting
Standard 13'' Accounting for Investments.
b. The Company''s share of contingent liability of WZTL is Rs. 29.80
million (March 31'' 2011: Rs. 20.55 million).
c. The Company''s share of the aggregate amounts of assets and
liabilities as on March 31'' 2012 and income and expenditures of WZTL
for the year ended March 31'' 2012 are as under:
13 Derivative Instruments outstanding as at March 31'' 2012 :
The Company is exposed to foreign currency fluctuations on foreign
currency assets / liabilities'' payables denominated in foreign
currency. In line with the company''s risk management policies and
procedures'' the Company enters into foreign currency forward contracts
and swap contracts to manage its exposure. These contracts are for a
period of maximum twelve months and forecasted transactions are
expected to occur during the same period.
(c) As at the Balance Sheet date'' the foreign currency exposure not
hedged by a derivative instrument or otherwise aggregates Rs. 143.94
million (March 31''2011 Rs. 190.97 million) for receivables (net of
provisions) and Rs.1529.15 million (March 31'' 2011 Rs. 1008.75 million)
14 The financial statements for the year ended March 31'' 2011 had been
prepared as per the then applicable'' pre revised Schedule VI to the
Companies Act'' 1956. Consequent to the notification of Revised Schedule
VI under the Companies Act'' 1956'' the financial statements for the year
ended March 31'' 2012 are prepared as per Revised Schedule VI.
Accordingly'' the previous year figures have also been reclassified to
conform to this year''s classification. The adoption of Revised
Schedule VI for previous year figures does not impact recognition and
measurement principles followed for preparation offinancial statements.