Zuari Industries

1.  Nature of Operations
 
 The Company is the manufacturer of chemical fertilizers and pesticides.
 The Company is also into trading business of complex fertilizers, seeds
 and pesticides.
 
 2. A sum of Rs. 1,073.16 lacs (Previous Year Rs. 7.12 lacs) on account
 of unamortized foreign exchange premium on outstanding forward exchange
 contracts is being carried forward to be charged to Profit and Loss
 account of subsequent period.
 
 3.  The Company has executed a corporate guarantee for Rs. 2,000.00
 lacs in favour of Cement Francis towards commitment to transfer
 prospecting/ mining license pertaining to lime stone reserves at
 Gulbarga Cluster.
 
 4.  Provision for diminution in value of Fertilizer Companies
 Government of India Special bonds has been done on the basis of
 quotation received from stock brokers for purchase of respective Gol
 Bonds.
 
 5.  i) Item 1,2 and 3 under head Secured Loans are secured by the
 first charge by way of hypothecation of the current assets, -
 both present and future, wherever situated pertaining to the Company
 and the Companys present and future book debts outstanding, moneys
 receivable, claims, bills, contracts, engagements, rights and assets.
 
 ii) Item 4 under head Secured Loans was secured by first charge on
 fixed assets, both present and future, and hypothecation of all movable
 machinery, spares, tools and accessories ranking pari passu with other
 lenders having first charge thereon.
 
 iii) Item 5 under head Secured Loans is secured by way of pledge of
 6.65% Fertilizer Companies Government of India Special Bonds 2023 of
 Rs.17,250 lacs (previous year Rs. Nil)
 
 iv) Credit obtained from Indian Oil Corporation Limited against supply
 of Naphtha to the extent of Rs 10,716.04 lacs (previous year Rs.
 6,931.04 lacs) (balance included under Current Liabilities) is secured
 by third charge on stocks of Raw materials, Finished goods, Stock in
 trade, Stores and Spares limited to Rs.l0,000.00 lacs.
 
 6.  Segmental Information
 
 - Primary Segment
 
 The Company is engaged in the manufacture, sale and trading of
 fertilizers, seeds and pesticides which, in the context of Accounting
 Standard 1 7 (Segmental Information) issued by the Institute of
 Chartered Accountants of India, is considered as the only business
 segment. Accordingly, no separate segmental information has been
 provided herein.
 
 - Secondary Segment - Geographical Segment.
 
 The Company primarily operates in India and therefore mainly caters to
 the needs of the domestic market. Therefore, there are no reportable
 geographical segments.
 
 7.  Related Party disclosures under Accounting Standard - 18
 
 a) The list of related parties as identified by the management are as
 under:
 
 i) Subsidiaries of the Company:
 
 (1) Indian Furniture Products Limited
 
 (2) Zuari Seeds Limited
 
 (3) Simon India Limited
 
 (4) Zuari Infrastructure and Developers Limited
 
 (5) Zuari Developers Private Limited with effect from 4th March, 2009
 
 (6) Gulbarga Cement Limited with effect from 30th December, 2008
 
 (7) Zuari Investments Limited with effect from 30th March, 2009
 
 (8) Zuari Chambal Insurance Brokers Limited - Subsidiary of Zuari
 Investments Limited
 
 (9) Zuari Commodity Trading Limited - Subsidiary of Zuari Investments
 Limited (with effect from 27th June,2008)
 
 (10) Zuari Financial Services Limited - Subsidiary of Zuari Investments
 Limited (with effect from 27th June,2008)
 
 ii) Joint Ventures of the Company:
 
 (1) Zuari Indian Oiltanking Limited
 
 (2) Zuari Maroc Phosphates Limited
 
 (3) Paradeep Phosphates Ltd - Subsidiary of Zuari Maroc Phosphates
 Limited
 
 (4) Zuari Rotem Speciality Fertilizer Limited
 
 iii) Associates of the Company* :
 
 (1) Style Spa Furniture Limited (An associate of a subsidiary)
 
 (2) Zuari Investments Limited (upto 30th March, 2009)
 
 (3) Zuari Chambal Insurance Brokers Limited (a subsidiary of Zuari
 Investments Limited) (upto 30th March, 2009)
 
 * Refer footnote f) in note. 23 above.
 
 iv) Key Management Personnel of the Company : (1) Mr. H.S. Bawa,
 Managing Director
 
 v) Relatives of Key Management Personnel of the Company :
 
 (1) Mrs. Veena Bawa
 
 (2) Mrs. Seema Behl
 
 (3) Mrs. Meenakshi Bowa
 
 8.  Employee benefits :
 
 The Company has a defined benefit gratuity plan. Every employee who has
 completed five years or more of service gets a gratuity on departure at
 15 days salary (last drawn salary) for each completed year of service.
 The scheme is funded with an insurance Company in the form of a
 qualifying insurance policy.
 
 The following tables summarize the components of net benefit expense
 recognized in the profit & loss account and the funded status and
 amounts recognized in the balance sheet.
 
 a) The estimates of future salary increases, considered in actuarial
 valuation, take account of inflation, seniority, promotion and other
 relevant factors, such as supply and demand in the employment market.
 
 b) Information relating to experience adjustment in the actual
 valuation of gratuity as required by Para 120 (n)(ii) of the Accounting
 Standard 15 (Revised) on Employee Benefits is not available with the
 Company.
 
 c) The current year being only the third year of adoption of AS 15
 (revised) by the Company, disclosures as required by Para 1 20 (n) of
 Accounting Standard 15 (Revised) have been furnished only for the
 previous two year and not for the two years prior to that.
 
 9.  The asset of Rs. 695.79 lacs (Previous Year Rs. 3,116.48 lacs)
 recognized by the Company as MAT Credit entitlement under Loans and
 Advances represents that portion of MAT liability, which can be
 recovered and set off in subsequent years based on the provisions of
 Section 11 5JAA of the Income Tax Act, 1961. The management, based on
 the present trend of profitability and also the future profitability
 projections, is of the view that there would be sufficient taxable
 income in foreseeable future, which will enable the Company to utilize
 MAT credit assets.
 
 10.  Under instructions from the Special Court (Trial of Offences
 relating to Transactions in Securities) Act, 1992- and in respect of
 shareholders who could not exercise their rights in view of disputes,
 mistakes, discrepancy in holdings etc., 1 0,564 (Previous Year 10,564)
 Rights Equity Shares entitlements have been kept in abeyance pursuant
 to Section 206A of the Companies Act, 1956.
 
 11.  Interest accrued on loans shown under Other Current Assets
 includes an amount of Rs. 296.75 lacs (Previous Year Rs. 154.28 lacs)
 receivable from subsidiaries.
 
 12.  Disclosure as per Section 22 of The Micro, Small and Medium
 Enterprises Development Act, 2006.
 
 13.  (a) The Government of India has notified the implementation of
 Stage III of New Pricing Policy with effect from 1 October,
 
 2006. Accordingly, all functional Naphtha based units, (including the
 Company) are required to get themselves converted into Natural Gas (NG)
 /Liquefied Natural Gas (LNG) within a period of 3 years. On the expiry
 of the aforesaid period, the rate of concession of such units will be
 restricted to the lower of the prevalent import parity price (IPP) or
 the Companys own rate. The management has initiated necessary steps
 for conversion of feed stock from Naphtha to Gas.
 
 (b) Subsidy for Urea has been accounted based on Stage III parameters
 of the New Pricing Scheme and other adjustments as estimated in
 accordance with known policy parameters in this regard.
 
 (c) Pending announcement of final rates of concession for complex
 fertilizers for the month of March 2009, the concession for this period
 has been estimated based on the known policy parameters in this regard
 and the difference between the notified base rates and estimated rates
 of concession amounting to Rs. 460.14 lacs has been accounted as
 payable to Government of India.
 
 (d) Government subsidies included Rs. 1,126.84 lacs (previous year
 reversal of Rs. 3,28.32 lacs) in respect of earlier years, notified
 during the year.
 
 14.  In an earlier year, a suit was filed by the Company before the
 Court of Additional Civil Judge, Sr. Division at Vasco-da-Gama against
 Hindustan Dorr-Oliver Limited (HDO) claiming a sum in excess of Rs.
 15,490.00 lacs (previous year Rs. 1 5,490.00 lacs) towards the refund
 of the amounts paid by the Company to HDO under the supply and service
 contract for pipe reactor system for NPK plant and the damages thereof,
 for non-fulfillment of the terms of the contract. Subsequently, HDO had
 filed a suit against the Company in the High Court of Judicature at
 Mumbai claiming the payment of Rs. 688.00 lacs payable under the NPK
 and DAP contracts, including the interest from the date the amount
 became payable at the rate of 18.50% per annum.
 
 Additional Civil Judge, Sr. Division, Vasco Da Gama passed the judgment
 on 1st October, 2007 ordering the recovery of Rs. 2,327.00 lacs from
 HDO and also recovery of 5.00% of the sum of Rs. 2,327.00 lacs from HDO
 and another party (Grande Paroisse S.A. or GP) jointly and severally
 with 18.00% interest from the date of passing of the Decree till the
 date of realization. 8oth HDO and GP had filed an appeal against this
 judgment at High Court of Bombay at Panaji, Goa.
 
 During the current year, their appeal is allowed with the stay on the
 decree to the extent of Rs. 2,327.00 lacs subject to condition that 50%
 of the said amount shall be secured by furnishing bank guarantee which
 shall be renewed pending the decision in the appeal and remaining 50%
 shall be secured by furnishing security to the satisfaction of the
 Court.
 
 Order further states that there shall be no stay with regard to the
 decree of the Trial Court to the extent of 5% of 2,32/00 lacs.
 Accordingly, HDO and GP have deposited a sum of Rs. 138.67 lacs
 including an interest of Rs. 22.32 lacs. As per the High court order,
 the Company can withdraw the said amount deposited by HDO and GP by
 furnishing the security to the satisfaction of Trial Court. However,
 the Company has not withdrawn this amount as yet.
 
 15.  In an earlier year, Haryana Urban Development Authority (HUDA) has
 cancelled an allotment of land made to the Company in Gurgaon. The
 Company applied to the High court of Punjab & Haryana for the stay on
 cancellation and case was decided in Companys favour. Pursuant to this
 order, the Company had made a payment of Rs. 210.54 lacs for purchase /
 allotment of land from HUDA along with an interest of Rs. 99.31 lacs
 during the year ended 31st March, 2007. As against this, HUDA has
 filedan appeal with the Division Bench of the High Court challenging
 the Learned Single Judges order. Pending resolution of the case, the
 total amount of Rs. 330.41 lacs (including 10% advance money paid in
 earlier years) has been shown as recoverable in the books.
 
 16.  Consequent to an outbreak of fire in the fertilizer division in
 the year 1998-99, the Company, based on its internal assessment and the
 opinion of the technical experts, raised an insurance claim of Rs.
 900.00 lacs with the insurers on account of the damages to the plant &
 machinery and the loss of profits. As the insurance company disallowed
 the claim, the Company went to the National Consumer Disputes Redressal
 Forum, which ruled in favour of the Company. Against the said order,
 the insurance company has filed an appeal with the Supreme Court.
 Pending the hearing, the Supreme Court in an earlier year had allowed
 the Company to withdraw the money deposited by the insurers with
 interest amounting to Rs. 1,321.17 lacs. This amount is appearing as
 payable in the books under the head Other Liabilities.
 
 17.  The Revenue Department of the Government of Goa has issued a
 notification under sub-section (1) of Section 4 of the Land Acquisition
 Act, 1894 on 5th February, 2007 and further notification on 19th April,
 2007 proposing to acquire 159,700 sq. mts. of the land belonging to
 Company for public purpose. The Company has filed an appeal with the
 High Court of Bombay at Goa against the notification. The High Court
 has asked status quo to be maintained on the land acquisition
 proceedings.
 
 18.  Under the Jute Packaging Materia) (Compulsory Use of Packing
 Commodities) Act, J 987, a specified percentage of fertilizer
 dispatched up to 31st August, 2001 is required to be supplied in jute
 bags. The provisions of the said Act were challenged in the Supreme
 Court, which upheld the constitutional validity of this Act in its
 judgment in 1996. Due to non-availability of jute packing materials,
 technical unsuitability and strong customer resistance to use of jute
 bags, the Company has been unable to adhere to the specified
 percentages and penalty in this regard, if any, will be accounted when
 ascertained.
 
 19.  The agreement with Zuari Maroc Phosphates Limited (ZMPL) for
 providing management services to Paradeep Phosphates Limited, which got
 suspended on 1st October, 2005, continues to remain so and consequently
 no management services fees has been accounted for during the year.
 
 20.  Rates and taxes includes Rs 121:43 lacs pertaining to earlier
 years which is paid consequent to the receipt of the decision from the
 Karnataka High Court during the year towards professional tax and
 interest expense includes Rs 55.92 lacs paid to Indian Potash Limited
 which is pertaining to earlier years. Reversal of earlier years
 provisions/liabilities and recovery of expenses of earlier years
 aggregating to Rs. 552.03 lacs (previous year Rs. 200.20 lacs) have
 been adjusted from the relevant expenses of the current year.
 
 21.  Investments
 
 i) The Company has an investment of Rs. 15,139.99 lacs and Rs. 4,835.35
 lacs in the equity shares and preference share capital respectively, of
 Zuari Maroc Phosphates Limited (ZMPL) which, in turn, has invested Rs.
 29,450.00 lacs in the equity share capital of Paradeep Phosphates
 Limited (PPL). As per the Iqtest available financial statements of PPL,
 it has accumulated losses which have resulted in erosion of a portion
 of its net worth. However, as a result of the actions initiated by its
 management, PPL has made substantial profits during the financial years
 ended 31st March 2007, 31st March 2008 and 31st March 2009.
 
 ii) The Company has investments of Rs. 400.00 lacs in non-cumulative
 preference shares of Style Spa Furniture Limited (SSFL). As per the
 latest audited financial statements of SSFL, it has accumulated losses
 which have resulted in erosion of a portion of its net worth. However,
 SSFL has made profits during the financial years ended 31st March,
 2005, 31st March, 2006, 31st March, 2007, 3 1st March, 2008 and 31st
 March,2009.
 
 iii) The Company has an investment of Rs. 2,300.01 lacs in the equity
 shares of Indian Furniture Products Limited (IFPL). Further, a sum of
 Rs. 1,860.51 lacs is recoverable from IFPL in respect of loans granted
 to it by the Company. As per the latest audited financial statements of
 IFPL, it has accumulated losses which have resulted in erosion of a
 portion of its net worth. However, IFPL has made profits during the
 financial years ended 31st March, 2008 and 31st March, 2009.
 
 iv) The Company has investments of Rs. 1,417.60 lacs in the equity
 shares of Zuari Seeds Limited (ZSL). Further the Company has given a
 trade advance of Rs. 681.41 lacs to ZSL. As per the latest audited
 financial statements of ZSL, its accumulated losses have resulted in
 erosion of its net worth.
 
 v) The Company has made investments of Rs. 255.00 lacs in the equity
 shares of Gobind Sugar Mills! Limited (GSM). Further a sum of Rs.
 1,050.00 lacs is recoverable from GSM in respect of loan granted to it
 by the Company. As per the latest audited financial statements of GSM,
 it has not recognized a liability of Rs. 9.63 crores which is due on
 the basis of Supreme Court decision in regard to State Advice Prices of
 sugarcane @ Rs. 125 per quintal as against Rs. 110 per quintal
 considered by GSM. It has also recognized deferred tax asset on
 unabsorbed losses and depreciation. After considering these two
 adjustments, the net worth of GSM is fully eroded.
 
 vi) The Company has an investment of Rs. 5.00 lacs in the equity shares
 of Gulbarga Cement Limited (GCL). Further a sum of Rs. 932.32 lacs is
 recoverable from GCL in respect of loan granted to it by the Company
 and a sum of Rs. 596.27 lacs is given to GCL as advance for purchase of
 its equity shares. As per the latest audited financial statements of
 GCL, its accumulated losses have resulted in erosion of its net worth.
 
 vii) The Company has an investment of Rs. 5.00 lacs in the equity
 shares of Zuari Infrastructure & Developers Limited (ZIDL). Further a
 sum of Rs. 413.98 lacs is recoverable from ZIDL in respect of interest
 accrued on loan granted to it by the Company. As per the latest audited
 financial statements of ZIDL, its accumulated losses have resulted in
 erosion of its net worth.
 
 viii) The Company has an investment of Rs. 828.82 lacs in the equity
 shares of Zuari Developers Private Limited (ZDPL). Further a sum of Rs.
 4,288.00 lacs is recoverable from ZDPL in respect of a loan granted to
 it by the Company and a sum of Rs. 54.70 lacs is recoverable from ZDPL
 for certain payments made by the company on their behalf. As per the
 latest audited financial statements of ZDPL, its accumulated losses
 have resulted in erosion of its net worth.
 
 ix) The Company has an investment of Rs. 258.90 lacs in the equity
 shares of Lionel India Limited (LIL). As per the latest audited
 financial statements of LIL, it has accumulated losses which have
 resulted in erosion of a major portion of its net worth. LIL has
 incurred losses in the last two financial years.
 
 These being long term investments and also in view of the projected
 profitable operations of the above Companies, management is of the view
 that the diminution in the value of these investments is temporary in
 nature and hence no provision (other than the provision accounted for
 in an earlier year in respect of Zuari Seeds Limited) is required to be
 made there against.
 
 22.  Previous years figures have been regrouped / recasted, wherever
 necessary to confirm to this years classification.