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Tamilnadu Telecommunications

BSE: 523419|NSE: TNTELE|ISIN: INE141D01018|SECTOR: Cables - Telephone
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Notes to Accounts Year End : Mar '15
1. The Company is having a system of sending letters to the Debtors for
 confirming the balance as at the year end 31st March. However the
 balances of debtors, creditors, loans and advances (other than
 Telecommunications Consultants India Limited (TCIL)) are subject to
 confirmation.
 
 2 a.  No provision is made for one long pending debtor Rs. 33,950,521
 (previous year Rs. 33,950,521) in view of the arbitration proceeding
 completed against the Purchaser for which the Award is received in
 favour of the Company but has since been challenged by the Purchaser in
 the court. Further the court remitted back the case to the Arbitrator
 for speaking orders which also has been awarded in favour of the
 Company after arguments, cross examinations and written submissions,
 during the year. The purchaser has again appealed in the Court.
 
 b. No provision is made for Rs. 1,339,656 (previous year Rs. 1,339,656)
 due from RailTel which was under arbitration.  In the Arbitration
 award, six claims were in favour of the Company and one against the
 Company. Company has appealed against the award in Delhi High Court and
 the proceedings are in progress.
 
 3. After restructuring as per the Sanctioned Scheme of BIFR during
 2010-11, the net worth of the Company was positive during 2010-11.
 However during the year 2011-12 the net worth has again eroded. The
 Company is already under rehabilitation period as per the BIFR
 Sanctioned Scheme. Lack of executable orders and dull phase of Optical
 Fiber Cable (OFC) market from the year 2010-11 onwards is the reason
 for the poor performance. During the year 2012-13 the Company had
 received order from BSNL for supply of 3206 KMs of OFC valuing
 Rs.159,701,104 and successfully executed the order in time and got 50%
 add-on order of 1602 KMs and executed during 2013-14 valuing
 Rs.79,800,740.  These two were the only major orders executed during
 these two years. Bharat Broadband Network Limited (BBNL), the Special
 Purpose Vehicle of the Government, had floated the tender towards the
 National Optic Fiber Network (NOFN) project to connect all the villages
 by broad band. The date of tender opening was 08.05.2013. Though the
 initial projection was 600000 KMs, the tender called for is to cover
 404995 KMs under six packages based on geographical location. For this
 huge quantum, BBNL has fixed the delivery time frame of eight months
 only including initial two months for preliminary arrangements. The
 Company has participated in one package considering its production
 capacity to cover the quantum in the given short delivery period. The
 Company has received APO and given acceptance during February, 2014 for
 5800 KMs including accessories. The Value of the APO is Rs.
 3,190,44,437. BBNL has proposed to issue PO in two phases of 50% each.
 During April,2014, BBNL has issued the first 50% PO for 2900 KMs
 including accessories valuing Rs. 159,527,319. Delivery period was upto October, 2014. BBNL has issued the
consignee details in full 
 periodically for four months consignments of 1740 KMs only. 
 For fifth  month consignment, consigee details were
 provided for only 48 KMs out of 580 KMs. Hence consignee details are
 not provided for balance around 1112 KMs. BBNL has extended the
 delivery schedule by another six months beyond October,2014. Hence the
 supply of balance around 1112 KMs and second 50% PO for 2900 KMs may be
 anticipated during 2015-16 for execution.  The Company has participated
 in the tender floated by BSNL for supply of 24,000 KMs of 24F HDPE DS
 OFC. The technical bid opened and the company has been technically
 qualified. Financial bid opened on 21.5.2015 and is under evaluation,
 which will be followed by e- reverse auction. Company is hopeful of
 getting orders around 2500 KMs which is projected to be executed during
 2015- 16. The requirement of OFC in the country is huge; however the
 delay in procurement is due to various procedural matters / issues in
 execution of big projects by the Government Clients. The Company is
 hoping to get continuous orders from 2015-16 onwards regularly since
 the OFC market is picking up. The order booking position is expected to
 be continuously good. Considering the scope during the immediate future
 and TCIL''s continuous financial support, the accounts have been
 prepared on going concern basis.
 
 4 Land: The Company is in possession of free hold land from Chennai
 Metropolitan Development Authority (CMDA) and the Tamilnadu State
 Government measuring around 9.82 acres. In case of sale of CMDA land by
 the company it has to be first offered to CMDA at the same purchase
 price. The land can be sold to other third parties only after getting
 No Objection Certificate (NOC) from CMDA. In the case of Tamilnadu
 State Government land it is to be utilized for the purpose for which it
 is allotted and surplus land if any, has to be surrendered.
 
 5 As per Accounting Standard 15 Employee Benefits, the disclosures of
 Employee benefits as defined in the Accounting Standard are given
 below:
 
 A) Defined contribution Plan
 
 Upto the year 2008-09 the Company has set up separate Trust for
 Provident Fund and has been contributing towards the same. In view of
 the fact that the Company is industrially sick as declared by BIFR and
 its net worth has fully eroded, the Provident Fund Commissioner-I has
 withdrawn with effect from 01.04.2009 the relaxation order issued under
 Para 79 of the Employees'' Provident Fund Scheme 1952, with a direction
 to remit the whole cash balance to Employees'' Provident Fund (EPF)
 Account No.1 and the balance available in Special Deposit Account to
 Central Board of Trustees, Employees'' Provident Fund. During the year
 the Company has followed the directions of the Provident Fund
 Commissioner- I and remitted the monthly contributions to the concerned
 Regional Provident Fund Commissioner.
 
 B) Defined Benefit Plan
 
 Gratuity (Un Funded) :
 
 The Company provides for gratuity, a defined benefit retirement plan
 (the Gratuity Plan) covering eligible employees.  The Gratuity Plan
 provides a lump sum payment to vested employees at retirement, death,
 incapacitation or termination of employment, of an amount based on the
 respective employee''s salary and the tenure of employment. Vesting
 occurs upon completion of five years of service. Liabilities with
 regard to the Gratuity Plan are determined by actuarial valuation as of
 the balance sheet date. The present value of obligation is determined
 based on actuarial valuation using the Projected Unit Credit Method.
 
 The following table set out the status of the gratuity plan as required
 under AS 15
 
 Note: The estimates of rate of escalation in salary considered in
 actuarial valuation, taken into account inflation, seniority, promotion
 and other relevant factors including supply and demand in the
 employment market. The above information is based on the valuation
 certified by the actuary.
 
 C) Leave encashmentThe employees of the Company are entitled to
 compensated absence. The employees can carry forward a portion of the
 unutilized accrued compensated absence and utilize it in future periods
 or receive cash compensation at retirement or termination of employment
 for the unutilized accrued compensated absence for a maximum of 240
 days. The Company records an obligation for compensated absences in the
 period in which the employee renders the services that increase this
 entitlement. The Company measures the expected cost of compensated
 absence as the additional amount that the Company expects to pay as a
 result of the unused entitlement that has accumulated at the balance
 sheet date based on actuarial valuations.
 
 6 a) Current Tax: No provision for income tax is made in view of the
 current year loss and the accumulated losses of previous years
 available for set off.
 
 b) Deferred tax: During the year the Company has not accounted/taken
 the credit/charge for the deferred tax assets/liabilities. The excess
 of timing difference over the deferred tax liability has been ignored
 for want of reasonable certainty of the company making taxable income
 in the near future. Similarly, for the same reason, certain other
 provisions made in the earlier years have been ignored for creation of
 deferred tax asset. The accumulated losses and carried forward
 depreciation under the tax laws have been ignored for creating the
 deferred tax asset considering that there is no reasonable certainty of
 the company making taxable income in the future in terms of para 26 of
 AS-22.
 
 The treatment noted above is in accordance with the Accounting Standard
 22 Taxes on Income notified under Section 133 of the companies Act,
 2013.
 
 7 Work-in-Progress under Inventories as on 31.03.2015 includes
 realizable scrap comprising short length cables, quality defects
 cables, excess production cables for operational reasons, type approval
 cables and disputed returned cables valuing Rs.5,116,178 (previous year
 Rs. 13,867,175). The above items are saleable with further processing
 and re- testing to the same or other customers.
 
 8 As stipulated in AS  28, the company is of the view that assets
 employed in continuing business are capable of generating adequate
 returns over their useful life in the usual course of business. There
 is no indication to the company of impairment of any asset and
 accordingly the Management is of the view that no impairment provision
 is called for during the year.
 
 9. The Company had undertaken on test basis during 2012-13, a new
 venture of assembling and supply of Tablet PCs to one of the promoters,
 Telecommunications Consultants India Limited (TCIL), towards TCIL''s CSR
 Project of supplying 150 nos.  of Tablet PCs to 10 State Government
 Schools in Vellore district of Tamilnadu. The project was successfully
 executed during 2012-13. No further business on this front,during the
 year 2014-15.
 
 10 CONTINGENT LIABILITIES
 
 (a) Claims against the company not acknowledged as debt:
 
 (i) Commercial Ta x Department had demanded a sum of Rs.18,608,794 as
 Additional Sales Ta x in respect of Financial Year 2000-2001 and
 2001-2002 (up to November 2001). The company has obtained a Stay from
 Madras High Court against the collection of above demand by depositing
 a sum of Rs.7,500,000 with Commercial Tax Department as directed by the
 High Court while granting the stay. As the demand is disputed, the same
 is not provided for in the accounts. The case came up for hearing
 during November, 2011and directions were issued to post the case along
 with the writ appeal before the Bench in another similar case where the
 judgement is in favour of the assessee.
 
 (ii) The Sales Ta x department has demanded a sum of Rs. 2,295,000
 during the financial year 2006-07 for non submission of C Forms from
 BSNL / MTNL pertaining to AY 2001-02, 2002-03 and 2003-04. The
 Government has exempted C forms in respect of inter-state sales to
 BSNL / MTNL. The company has represented to the Department and also
 referred the matter to BSNL / MTNL.
 
 (iii) The Customs Authority has demanded an amount of Rs. 3,155,226
 towards difference in classification of Optical Fibre during the year
 2006-07. However the order of the Commissioner of Customs has come in
 favour of the Company during the year 2009-10 dropping the proceedings.
 Department has gone for appeal against the order.
 
 (b) Guarantees:Guarantees arranged by TCIL in favour of the Company and
 issued by Banks outstanding as at March 31, 2015 is Rs.108,494,216
 including expired Bank Guarantees to the extent of Rs.11,717,894
 (previous year Rs.142,139,028 including expired Bank Guarantees to the
 extent of Rs. 10,874,154 )
 
 11 Commitments
 
 (a) Estimated amount of Contracts remaining to be executed on Capital
 Account and not provided for during the year is Rs. ''Nil'' (previous
 year Rs. ''Nil'')
 
 (b) Uncalled liability on shares and other investments which are partly
 paid up during the year is Rs.''Nil'' (previous year Rs.''Nil'')
 
 12 The Company has no long term operating lease. No financial lease has
 been availed during the year
 
 13 A demand was raised by Income Tax Department towards tax to be
 deducted at source on Royalty amounting to Rs.2,542,165 (for the years
 2000-01 & 2001-02). The company, has however, paid the entire amount of
 demand, out of which Rs. 2,193,733 is kept as recoverable. Appeal filed
 by the company for the above is pending in the Tribunal.
 
 14 A writ petition has been filed by the Company in Madras High Court
 during the year 2008 against BSNL for reducing the awarded rate during
 the scheduled delivery period, in one of their orders without giving
 effect to BSNL''s amendment to the ''Fall clause'' applicable from
 01.08.2005. BSNL has rejected and returned the differential claim
 invoice of the company for Rs.13,991,251. The case is pending in Madras
 High Court.
 
 15 Figures of previous year have been regrouped / rearranged, wherever
 necessary, to conform to the current year''s classification.
 
 16.  Applicability of Companies Act, 2013:Since it is notified as per
 General Circular No. 8/2014 dated 04.04.2014 issued by Ministry of
 Corporate Affairs that the financial statements as per Companies Act,
 2013 is applicable with effect from Financial Year commencing from
 01.04.2014, the financial statements have been prepared as per the
 Companies Act, 2013.
 
 17.  There was a fire incident in the store yard of the factory on
 12.01.2015 and most of the WIP inventories, part of external portion of
 factory building, minor part of Plant & machinery including electrical
 installations got damaged. Insurance claims lodged with the Insurer.
 The total insurance claim lodged for Rs.74,723,904. Out of this, the
 cost of damaged WIP inventories excluding excise duty and salvage value
 Rs.62,386,677 and reimbursement of actual expenditures incurred during
 the fire incident Rs. 83,917 only have been accounted as insurance
 claims receivable under ''Other Current Assets'' with credit to ''Other
 Income''. The corresponding stock value of the damaged WIP reduced from
 the WIP inventories. For other claims, the same shall be accounted as
 per expenditure incurred / insurance claims settled. The claim amount
 being huge, the insurance claim settlement process takes time. However,
 based on the surveyor''s interim report, the insurer has made provisions
 towards this claim to the extent of Rs.64,000,000.
 
 18.  a) A civil suit has been filed by the company in Delhi High court
 on 31.03.2011 to stay the Advance Purchase Order issued by BSNL, HQ for
 supply of 42000 KMs of OFC. This is in addition to the purchase order
 issued during January, 2011 for supply of 18000 KMs. The order for OFC
 supply is with Nylon 12 jacketing and subsequently BSNL has changed the
 specification with HDPE Double sheathing. During the year 2011-12 BSNL
 has floated tender for 42000 KMs with the new specification. The case
 in Delhi High Court against the APO is in progress.  b) The Company had
 taken up with BSNL for short closure of the PO for supply of 18000 KMs
 or to invoke the Arbitration clause. During the year the Arbitration
 clause has been invoked and arbitration proceedings are in progress.
 
 19. The Company has not received information from vendors regarding
 their status under the Micro, Small and Medium Enterprises Development
 Act, 2006 and hence the disclosure relating to amounts unpaid as at the
 year end together with interest paid / payable under this Act could not
 be ascertained
 
 20. Related Party Disclosures : Disclosures as required by the
 Accounting Standard 18 Related Party Disclosures are as given below:
 
 List of Related Parties:
 
 Associate Companies 1. Fujikura Ltd., Japan, Technical Collaborator &
 Equity Partner
 
 2. Telecommunications Consultants India Ltd., New Delhi, Equity Partner
 
 Key Managerial Personnel 1. Shri.V.S.Parameswaran, Managing Director
 
 2. Shri.V.Mohan, Group General Manager (Finance)
 
 * Movement in balance includes exchange rate fluctuation ** Includes
 only Shri.V.S.Parameswaran, Managing Director
Source : Dion Global Solutions Limited
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