Delisting Companies

6 5May 02 – 15, 2011 CAPITAL MARKET

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Watch list

The following are fundamentally strong companies identified by Capital Market analysts. The list is constantly reviewed and updated,adding scrips with upward potential and removing those that have, in our opinion, exhausted their run.

COMPANY IND. PRICE (Rs) TTM TTM P/ENO. 25-04-2011 YEAR EPS (Rs)

COMPANY IND. PRICE (Rs) TTM TTM P/ENO. 25-04-2011 YEAR EPS (Rs)

TTM: Trailing 12 months. Note: India Nippon Electricals replaces Suprajit Engineering.

3i Infotech 28 48 201103 5.7 8.4

3M India 101 3941 201012 87.3 45.1

Ador Fontech. 41 106 201012 9.7 10.9

Ador Welding 41 183 201012 19.8 9.2

Agro Tech Foods. 83 366 201012 7.7 47.4

Asian Hotels (N) 57 224 201012 15.2 14.8

Astral Poly 75 167 201012 14.9 11.2

B H E L 39 2075 201012 104.6 19.8

Bajaj Electric 36 276 201012 12.6 21.9

BASF India 22 683 201012 29.5 23.1

Bata India 58 418 201012 14.8 28.2

Bayer Crop Sci. 68 953 201012 37.4 25.5

BEML Ltd 44 725 201012 56.2 12.9

Bharat Bijlee 39 1161 201012 89.8 12.9

Bharat Electro. 43 1831 201012 70.3 26.1

Blue Dart Exp. 32 1498 201012 39.8 37.6

Blue Star 2 367 201012 19.8 18.5

Bosch 10 6548 201012 273.5 23.9

Castrol India 22 470 201012 19.8 23.7

Clariant Chemica 22 710 201012 38.9 18.3

CMC 26 2033 201103 102.8 19.8

Cox & Kings 104 430 201012 10.1 42.7

CRISIL 106 6565 201103 234.2 28.0

Cromp. Greaves 39 282 201012 10.3 27.3

Esab India 41 520 201012 34.3 15.2

Everest Inds. 20 167 201012 23.7 7.0

Fag Bearings 13 1200 201103 86.3 13.9

Federal Bank 12 437 201012 31.1 14.1

Foseco India 22 546 201103 32.7 16.7

G S F C 49 367 201012 73.0 5.0

GAIL (India) 106 479 201012 29.1 16.5

GEI Industrial 44 214 201012 15.1 14.2

Godrej Consumer 65 373 201012 11.6 32.2

Grasim Inds 107 2467 201012 117.5 21.0

Greaves Cotton 46 92 201012 5.8 15.9

Grindwell Norton 1 225 201012 14.7 15.4

Guj Apollo Inds 44 155 201012 12.0 12.9

Guj Gas Company 106 376 201012 18.1 20.8

Guj.St.Petronet 106 103 201012 8.2 12.5

H D F C 51 731 201012 22.6 32.3

H T Media 47 155 201012 9.0 17.3

HCL Technologies 27 515 201103 15.2 33.8

HDFC Bank 12 2390 201103 84.4 28.3

Hikal 71 314 201012 31.9 9.8

Honda Siel Power 39 392 201012 24.5 16.0

Honeywell Auto 43 2425 201103 121.5 20.0

I D F C 50 156 201012 8.2 19.0

ICRA 106 1120 201012 47.3 23.7

IFGL Refract. 81 39 201012 2.1 18.2

IL&FS Transport 45 225 201009 0.0 0.0

India NipponElec 10 263 201012 30.8 8.6

Indian Hotels 57 88 201012 1.4 61.1

Ineos ABS (India 69 529 201012 39.2 13.5

Infosys Tech. 27 2942 201103 102.3 28.8

Ingersoll-Rand 25 507 201012 20.9 24.2

Intl. Travel Hse 104 210 201012 19.5 10.8

J & K Bank 12 821 201012 123.1 6.7

J B Chemicals 70 161 201012 15.6 10.3

Jagran Prakashan 47 121 201012 6.2 19.6

JMC Projects 31 157 201012 15.3 10.3

Jyoti Structures 102 91 201012 12.2 7.5

Kalpataru Power 102 131 201012 12.1 10.8

Kennametal India 44 615 201012 30.9 19.9

Kirl.Pneumatic 25 442 201012 31.6 14.0

KPIT Infosys. 28 176 201012 5.5 32.3

KSB Pumps 78 278 201012 14.0 19.9

L G Balakrishnan 10 305 201012 45.7 6.7

Lak. Mach. Works 92 2425 201012 137.8 17.6

Larsen & Toubro 45 1722 201012 56.7 30.4

LIC Housing Fin. 51 226 201012 16.0 14.1

M & M 7 768 201012 41.5 18.5

M M Forgings 17 137 201103 18.4 7.5

Manjushree Tech. 62 80 201012 10.4 7.7

Maruti Suzuki 6 1327 201012 76.4 17.4

McNally Bharat 45 211 201012 14.9 14.1

MIC Electronics 43 26 201012 5.0 5.2

Monsanto India 68 1786 201012 66.3 27.0

MphasiS 27 455 201101 45.8 9.9

Mundra Port 106 147 201012 4.1 35.6

Oracle Fin.Serv. 27 2116 201012 92.8 22.8

Petron Engg. 45 421 201012 35.4 11.9

Pidilite Inds. 22 160 201012 6.4 25.2

Rallis India 67 1453 201012 65.6 22.2

Reliance Inds. 80 1009 201103 62.0 16.3

Rishi Laser 44 55 201012 6.3 8.7

Shanthi Gears 44 38 201012 2.9 13.2

Shree Cement 18 1992 201012 21.8 91.5

Siemens 43 837 201012 24.0 34.9

Sintex Inds. 108 179 201012 11.9 15.0

SKF India 13 630 201012 31.9 19.8

South Ind.Bank 12 23 201012 2.2 10.4

St Bk of Bikaner 11 559 201012 75.7 7.4

St Bk of India 11 2919 201012 159.3 18.3

Sun TV Network 47 422 201012 18.5 22.8

Sundram Fasten. 48 60 201012 4.7 12.7

Swaraj Engines 46 454 201012 33.2 13.7

Tata Chemicals 49 378 201012 16.3 23.2

Tata Global 89 102 201012 2.7 37.4

TCS 27 1198 201103 36.0 33.3

Thermax 44 660 201012 29.8 22.2

Thomas Cook 104 61 201012 1.5 40.7

Vesuvius India 81 353 201103 25.3 13.9

V-Guard Inds. 39 191 201012 11.6 16.5

Vivimed Labs. 22 294 201012 25.4 11.6

6 6 May 02 – 15, 2011 CAPITAL MARKET

StockWatch

India Nippon Electricals

Ignites strong confidenceCaters to all the major two-, three-wheeler and portable gensetplayers, who are likely to sustain growth in future as well

Motorcycles and Scooters account for 70%of the company’s business.

In the three-wheeler space, IndiaNippon’s major customers are Piaggio andTVS Motors, while Honda Siel Power andBirla Power Solutions are the main cus-tomers for its gensets. In 2010, the com-pany started supplying external combus-tion units for diesel passenger cars and hasa contract with Tata Motors.

India Nippon’s sales rose a strong 45%to Rs 60.18 crore in the quarter ended De-cember 2010. OPM improved 140 basispoints (bps) to 13.3%, OP 62% to Rs 7.98crore. Other income fell 3% to Rs 1.08 crore.Interest cost was at Rs 5 lakh as against Rs3 lakh and depreciation fell 14% to Rs 96lakh. As a result, PBT rocketed 65% to Rs8.05 crore. Taxes grew 144% to Rs 2.07 crore,despite which net profit ballooned 48% toRs 5.98 crore.

India Nippon reported an impressive risein sales of 41% to Rs 171.81 crore for thenine months ended December 2010. OPMrose 80 bps to 14.8%, taking OP up 49% toRs 25.35 crore. Net profit increased an im-pressive 35% to Rs 19.76 crore.

The auto industry, especially thetwo- and three-wheeler segments, sawstrong growth in the fiscal ended March2011 (FY 2011). The growth uptrend isexpected to continue in FY 2012 as thepower situation in the country not show-ing any signs of improvement. Suppliesto a new customer in the US have com-menced. The customer has evinced inter-

est to source one more product fromthe company. Overall, exports pros-pects are good.

We expect India Nippon to reg-ister sales and net profit of Rs237.62 crore, and Rs 26.97 crore,respectively, in FY 2011. On equityof Rs 8.08 crore and face value ofRs 10 per share, EPS works out toRs 33.4, which can go up to Rs 41.8in FY 2012.

India Nippon is a zero-debt com-pany with cash and liquid invest-ment of around Rs 70 crore endMarch 2010. Book value is set tocross Rs 210 as of March 2011. Thecompany is expected to give divi-dend of 100% or Rs 10 per share inFY 2012. The share price trades atRs 263. P/E on FY 2011 projectedEPS is 7.9, which falls to 6.3 on FY2012 projected EPS. �

ers, wood saw cutters and other types ofIC engines. Currently, the company’s rangecaters to two- and four-stroke engine ca-pacity of 30 cc to 175 cc. It has acquiredcapability to provide solutions for otherapplications also.

Besides TVS Motors, India Nippon hasa sizeable exposure to other manufacturerssuch as Hero Honda and Bajaj Auto as well.These three companies along with Honda

A crucial peg

India Nippon Electricals is a leader inthe ignition system, a critical compo-nent used to manufacture two- andthree-wheelers and portable engines

Incorporated in 1984, India NipponElectricals (India Nippon) was convertedin 1986 into a joint venture betweenLucas Indian Service, a wholly-ownedsubsidiary of Lucas-TVS, and KokusanDenki Company, Japan, a group com-pany of Hitachi Japan, to manufactureelectronic ignition systems for two- andthree-wheelers and portable engines. Cur-rently, foreign promoters hold 20.52%equity s take and Indian promoters45.87%. Over the years, the company hasenlarged its customer base and now sup-plies to most manufacturers of two- andthree-wheelers and gensets.

Commencing its operation in Hosur(Tamil Nadu), India Nippon has set uptwo more units — one is Pondicherry andthe other at Rewari in Haryana — to benearer to customers and offer servicesuch as just-in-time supplies and to im-prove response time for introduction ofnew products.

The ignition system is one of the criti-cal components in two- and three-wheel-ers and portable engines as it provides theinitial power to start the engine, the con-tinued spark that keeps the engine run-ning and is responsible for a safeshut-down operation. With increasein buyer expectation and fall in thecosts of technology (electronic igni-tion systems), it is increasingly be-coming imperative for many two-wheeler manufacturers to incorporatethis component in their vehicles. Elec-tronic ignition systems can also playa key role in improving fuel efficiencyand lowering the emission levels oftwo-wheelers.

India Nippon’s product portfoliooffers a full range of ignition systemsolutions including custom-built igni-tion system parts such as flywheelmagneto, digital and analog CDI andTCI, regulators and rectifiers, and ig-nition coils needed for application invarious types of engines fitted in mo-torcycles, scooters, mopeds, three-wheelers, portable gensets, lawn mov-

India Nippon Electricals : Financials

0803 0903 1003 1103 1203

(12) (12) (12) (12P) (12P)

Sales 120.23 127.92 169.08 237.62 297.03

OPM (%) 12.6 8.0 14.0 14.8 15.0

OP 15.13 10.20 23.68 35.22 44.67

Other inc. 6.28 7.73 5.84 4.51 4.96

PBIDT 21.41 17.93 29.52 39.73 49.63

Interest 0.11 0.17 0.18 0.18 0.19

PBDT 21.3 17.76 29.34 39.55 49.45

Dep. 3.26 2.84 3.57 3.64 4.37

PBT 18.04 14.92 25.77 35.91 45.07

Total Tax 3.02 3.17 5.85 8.94 11.27

PAT 15.02 11.75 19.92 26.97 33.80

EPS (Rs) * 18.6 14.5 24.7 33.4 41.8

* Annualised on current equity of Rs 8.08 crore. EO: Extraordinary items.Face Value: Rs 10 per share. Figures in Rs crore. (P): Projections.EPS is calculated after excluding EO and relevant tax.Source: Capitaline Databases


StocksInActionStocksInAction

Delisting maniaMNC associate firms sizzle on rising speculation of open offersfrom foreign promoters to take their Indian arms privateMultinational companies, or MNCs, arepopular among investors due to their trackrecord of paying hefty dividends, steadybusiness growth supported by professionalmanagement, and a cash-rich and debt-freestatus. Shares of 11 MNC firms have loggedan average rise of 54.85% in the year to 21April 2011, with 10 of them logging gainsthat have outpaced the BSE Sensex’s 12.19%advance by a hefty margin.

Apart from the traditional theory, an-other theme developing recently is that ofdelisting, making MNC shares the flavor ofthe season. This trigger has bolstered senti-ment for these shares. Shares of select MNCassociate firms have been in demand on buzzof open offer from their parent firms, whileothers have advanced on steady accumula-tion by savvy investors in anticipation ofthe Indian firm going private sooner or later.

As per the latest guidelines, a companycan be delisted from the stock exchanges ifthe promoter group is successful in rampingup its stake above 90% through open offer.In case the promoter holding is already over90%, then at least 50% of the delisting offersize has to be acquired to term it successful.Earlier, promoters with more than 60% stakewere allowed to go for delisting. The methodto arrive at the delisting price was not trans-parent and investors were given a ‘take-it orleave-it’ option by the companies. Govern-ment norms in the 1970s had forced manyMNC associates to list on Indian bourses.

MNC associate stocks have been on aroll ever since a June 2010 government noti-fication made it mandatory for all privatecompanies to boost their public holding to25% within three years to remain listed onthe bourses. To comply with the norms,foreign promoters are more likely to opt fordelisting their Indian arm rather than dilutetheir stake. For delisting to be successful, anattractive premium to the ruling market pricehas to be offered. The new norms furtherrequire all listed companies to maintain atleast 25% public shareholding at all times.

MNC shares’ northbound journey accel-erated after Sweden-based promoter of con-struction equipment maker Atlas Copco ABagreed in March 2011 to pay Rs 2750 per

share to buy out minority shareholders in At-las Copco India — a hefty premium of 92.84%over its floor price of Rs 1426 per equity share.The foreign promoter held 83.77% stake inthe Indian unit, sparking speculation that firmswith foreign holding of 80% and above havehigh probability of coming out with delistingopen offers. MNC associate stocks that haveseen action based on delisting include:Astrazeneca Pharma India: The Bangalore-based pharma firm has gained 42.15% to Rs1308.80 in the year to 21 April 2011 as veryhigh promoter holding makes it a probable

delisting candidate. Shareholding of the Swe-den-based drug maker Astrazeneca Pharma-ceuticals AB in Astrazeneca Pharma India hasbeen 90% and above since December 2002.Attempts made to delist the company havefailed five times since then.

The first offer to buy out the non-pro-moter holding of 43.51% at Rs 375 wasmade in March 2002 and the fourth at Rs875 a piece in July 2004. A fifth attempt inSeptember 2010, at an indicative delistingprice of Rs 1152 per share, flopped at theonset as votes cast by the shareholdersthrough a postal ballot in favour of the reso-lution were less than twice the number ofvotes against the resolution. Under the newdelisting regulations, companies need to ob-tain prior approval by postal ballot of atleast two-thirds of the public shareholders.

The Astrazeneca Pharma India stock hasseen a steady rise since the sub Rs 100-markmid 2003 to Rs 1300 mid 2010. The scrip hita record high of Rs 1448.45 on 30 June 2010from its 52-week low of Rs 802 on 26 May2010. The shares are richly valued and com-mand a P/E multiple of 58.66 based on trail-ing 12-month EPS of Rs 22.31, indicating highprobability of a likely delisting offer.Honeywell Automation India: The Pune-based electronics firm recovered to settle atRs 2429.50 on 21 April 2011 following re-ports of a likely delisting offer from the par-ent. However, there has been no clarifica-tion by the company. Earlier, the shares sawa steady retreat, after a record high of Rs3279.85 on 22 April 2010, to drop to a 52-week low of Rs 2015 on 11 February 2011when the company reported a fall in netprofit in the year ended December 2010 (CY2010) over CY 2009.

Honeywell Automation India, an 81.24%subsidiary of US-based Honeywell Interna-tional, is an integrated automation and soft-ware solutions provider. Public holding stoodat 12.02% end December 2010. No openoffer has been made by the parent firm toshore up equity stake in the past. The sharestrade at a P/E multiple of 20.49 based ontrailing 12-month EPS of Rs 118.56.Fresenius Kabi Oncology: The NewDelhi-based oncology drug maker staged arebound to settle at Rs 122.45 on 21 April2011, boosted by reports of a likely delistingoffer from the parent. However, there hasbeen no clarification by the company.

Fresenius Kabi Oncology had acquiredDabur Pharma in 2008 and renamed itthereafter. Latest promoter ownership

Curtain call?

Probable delisting candidates

COMPANY FOREIGN PROMOTER 1-YEAR

NAME HOLDING (%) RETURN (%)*

Astrazeneca Pharma India 90 42.15

BOC India 89.48 43.52

Alfa Laval (India) 88.77 17.73

Elantas Beck India 88.55 136.95

Kennametal India 88.16 51.67

Fairfield Atlas 83.91 41.53

Ineos ABS (India) 83.33 75.61

Blue Dart Express 81.03 54.24

Oracle Financial 80.44 -9.71

Timken India 80.02 92.60

3M India 76.01 57.06

BSE Sensex NA 12.19* till 21 April 2011

Withdrawal symptoms


StocksInAction

stood at 90%, with public stake pegged at5.96%. Promoters had boosted their hold-ing to 90.89% in July 2008 after acquiring17.62% equity through an open offer for20% stake to the minority shareholders atRs 76.50 per share.

The shares of Fresenius Kabi Oncologytrade at a P/E multiple of 36.99 based ontrailing 12-month EPS of Rs 3.31. The com-pany did not declare dividend since the lastfour years to March 2010.Alfa Laval (India): The Pune-based capitalgoods maker surged to a record high of Rs1760 on 8 April 2011 on rising buzz of anopen offer from the Swedish-based Alfa LavalCorporate AB, which owned 88.77% stakeend March 2011. However, there has beenno clarification by the company. The scriphas advanced a sharp 57.98% since slidingto a 52-week low of Rs 1114 on 25 Febru-ary 2011 on reporting fall in net profit andsales in the year ended December 2010 (CY2010) over CY 2009.

The parent firm has made three openoffers to acquire shares from the public. Itshored up its stake from 51% to 64.1%through an open offer at Rs 164 per share in2001 and to 76.73% at Rs 1300 per share in2007 and further to 88.77% at Rs 1000 pershare in 2009. The 2009 offer, which wasrevised upwards from the earlier announcedRs 950 per share, was to take advantage ofthe market slide caused by the global marketmeltdown. The parent had also sweetenedthe 2007 offer from the earlier announcedRs 875 per share as it failed to elicit thedesired shareholder response.

The Alfa Laval (India) stock has seen amultifold surge to Rs 1725 on 21 April 2011from Rs 151 on 1 January 2001 buoyed bythe stake ramp-up by the parent. The sharestrade at a P/E multiple of 31.57 based ontrailing 12-month EPS of Rs 54.64.BOC India: The Kolkata-based industrialgases producer advanced 43.52% to Rs306.35 in the year to 21 April 2011 amidvolatile swings. From the Rs 200 level inJune 2010, the stock rallied to Rs 360 inDecember 2010 only to slide to Rs 225 inFebruary 2011. The scrip recommenced itsupmove to gain 15.73% to Rs 306.35 in themonth to 21 April 2011 on buzz of freshopen offer from the parent. However, therehas been no clarification by the company.The shares trade at a P/E multiple of 27.9based on trailing 12-months EPS of Rs 10.98.

The volatility was caused by the Ger-many-based Linde Group’s failed attempts

mid 2010 to acquire the remaining shares at aprice discovered through a delisting open of-fer, with the floor price pegged at Rs 225.29a piece. When the offer closed in January2011, the number of shares tendered by theshareholders was less than the minimum num-ber of shares required to successfully com-plete the offer. The Linde group owned89.48% stake in BOC India, with public hold-ing pegged at 10.53% end March 2011.

In 2008, the foreign promoter had an-nounced an open offer to acquire a 20% stakein the Indian unit at Rs 165 per share, whichwas later revised to Rs 200 per share, fol-lowing the global takeover of BOC India’serstwhile parent firm BOC Plc. Dividendpayment per share declined steadily to Rs1.5 in the year ended December 2010 (CY2010) from Rs 2.5 in CY 2007.Elantas Beck India: The Pune-based spe-cialty chemicals maker shot up 183.54% toRs 1404.25 in the year to 30 March 2011after striking a record high of Rs 1419 ontalk of a probable delisting offer from theparent firm at a significant premium to themarket price. Thereafter, the stock cooledto settle at Rs 1263.65 by 21 April 2011 asthere was no clarification by the companyon the delisting speculation. The shares tradeat a P/E multiple of 31.93 based on trailing12-months EPS of Rs 39.57

Plans of the German-based ElantasGmbh, which owned 88.56% stake inElantas Beck India end December 2010, tobuy out the minority shareholders at a floorprice of Rs 219.10 per share and an indica-tive price of Rs 330 failed in 2010 due topoor investor response.Ineos ABS (India): The Baroda-based pet-rochemicals firm advanced 41.99% to Rs

525.35 in the month to 21 April 2011 afterstriking a record high of Rs 549.80 follow-ing reports that the company’s parent hasinitiated the delisting process of its Indianunit and might delist shares at Rs 800 apiece. However, there has been no clarifi-cation by the company.

European chemical giant Ineos ABS Jer-sey held 83.33% stake in Ineos ABS (India)while public holding stood at 13.57% endMarch 2011. The foreign promoter shoredup its holding in Ineos ABS (India) afteracquiring 13.53% stake at Rs 201 per sharein an open offer in 2008. The shares of IneosABS (India) trade at a P/E multiple of 13.42based on trailing 12-month EPS of Rs 39.16.Kennametal India: The Bangalore-basedmachine tools maker gained 51.67% to Rs602.35 in the year to 21 April 2011 on specu-lation of a likely open offer citing high for-eign promoter holding. However, there hasbeen no clarification by the company. Theadvance came even as the US-based parentfirm’s December 2010 plan to take its In-dian arm private hit a roadblock after itsshareholders rejected the delisting proposalon perception of high future growth poten-tial and attractive valuations.

The US-based Kennametal Inc, owningan 88.16% stake in Kennametal India endMarch 2011, proposed to buy out the mi-nority shareholders and had set a floor priceat Rs 514.98 a share. Consequently, the stockshot up to a record high of Rs 684.80 on 3January 2011, up 110.06% from its 52-weeklow of Rs 326 on 2 June 2010. Followingthe recent upsurge, the shares trade at a P/Emultiple of 19.49 based on trailing 12-monthEPS of Rs 30.91Timken India: The Bangalore-based autoancillary firm gained 29.19% to Rs 214.85 inthe month to 21 April 2011 after striking a52-week high of Rs 222.90 on 18 April 2011,taking wings from speculation of delisting of-fer from the foreign promoter. However, therehas been no clarification by the company.

Timken India, formerly Tata Timken,was co-promoted by The Timken Com-pany, US, and Indian steel giant Tata Steel.In 1999, Timken acquired Tata Steel’s 40%equity and, consequently, increased its hold-ing to the current 80.02%. Despite beingprofitable since data available from 2000, thecompany is yet to reward equity sharehold-ers with dividend and bonus shares. Theshares trade at a P/E multiple of 21.90 basedon trailing 12-month EPS of Rs 9.81

— Hitesh Dharawat

22/04/2010 21/04/2011

190

240

290

340

390

Once bitten

Volatility in BOC India was caused by theGermany-based Linde Group’s failedattempts mid 2010 to delist with the floorprice pegged at Rs 225.29 a piece

BOC India

ApnaMoney Investment Strategy

69May 02 – 15, 2011 CAPITAL MARKET

Taxation

Proof of intentionWhen an employer files e-returns, it is presumed thestatements in the returns have been verified

The Maharashtra State Tax on Professions,Trades, Callings & Employments Rules,1975, have been amended through a noti-fication dated 31 January 2011. It was man-datory for employers who are liable to filetheir profession tax returns monthly to up-load their returns in electronic mode from1 February 2011, as per the notification is-

sued in November 2010. From 31 January2011, as per the newly inserted Rule11(2A), profession tax return in electronicform is to be in form IIIB and payment asper return is to made by challan MTR–6.

There are two MTR-6 challans: one forpayment for Central sales tax and one forpayment of profession tax. Both are differ-

ent challans. Forms IIIA and Form VIII willcontinue to apply for physical returns.

If the certificate of registration heldby the employer requires an amendmentof registration number, then the prescribedauthority have to make necessary amend-ments in the certificate and issue a newcertificate of registration to ensure com-patibility with the automated system.When a new certificate of registration isissued to the employer, then the certifi-cate of registration issued earlier willstand amended.

At present, employers whose yearlyprofession tax liability is less than Rs 5000an required to file returns yearly, whoseyearly tax liability is between Rs 5000 toRs 20000 are required to file returns quar-terly, and whose yearly tax liability is morethan Rs 20000 are required to upload re-turns monthly. From 1 April 2011, if taxliability of an employer during the previ-ous year is less than Rs 50000, he will berequired to file profession tax returnsyearly. If such tax liability is Rs 50000 ormore, then he will be required to uploadprofession tax returns monthly. Quarterlyreturns are no longer there. For new pro-fession tax registrations, returns are to beuploaded monthly during the first year ofregistration.

Rule 11E state that e-returns are pre-sumed to be true returns. When an em-ployer has enrolled himself with thewww.mahavat.gov.in website for availinge-services including the service of filinge-returns, has created his own passwordand files e-returns using the password socreated by him, it is presumed that the state-ments contained in the returns filed elec-tronically are true to the best of his knowl-edge and belief.

— Tushar Doctor

ApnaMoney



Investment Strategy

Checking the pulseTo know the health of mid-cap companies, focus on auditors’comments, FCCB exposure and activities of subsidiaries

the latest information including basic busi-ness and financial details, shareholding pat-tern, corporate governance contact details,and agreements with media companies.Hopefully, this initiative would reduce thehassles of investors in getting information.

The number of companies disclosingcritical information through the notes couldbe small. But the quality of informationshared could be significantly important toinvestors because, while analysing thequarterly results, it is essential to ensureapple-to-apple comparison to arrive at theright conclusions and appreciate opera-tional performance of companies in thecorrect perspective. For instance, one-timeprofit earned on sale of long-term invest-ment either in the current quarter or theprevious quarter and considered under,‘Other income’ (OI) could make financialsnon-comparable. This can be fixed by look-ing at the notes to accounts.

Apart from quantitative details, the quali-tative information shared can also assist inevaluating the operational and financial per-formance of companies. These disclosuresinclude operational costs such as employeecost, exports, greenfield projects, maintenanceshutdown, proposed joint ventures, com-

ApnaMoney

Quarterly numbers churned out by compa-nies are important for investors as these revealtheir financial and operational performance.However, the notes to accounts that are pub-lished along with the quarterly results are alsoequally important as they provide significantand crucial information to investors.

Generally, the notes to accounts disclosea standard set of information including in-vestors’ grievances, segmental results andmatters decided at the board meeting. Manycompanies also share some kind of off-the-track information. Thus, it is essential tocarefully study the accompanying notes toaccounts to make informed decision.

Ideally, companies should providestandalone and consolidated results on theirwebsites. However, many mid and smallcompanies do not post their results on thewebsites promptly. Companies upload re-sults – standalone or consolidated – as pertheir will. A few upload scanned copies ofthe results, which are not readable.

In a recent positive development, theSecurities and Exchange Board of India hasmade it mandatory for companies to haveupdated websites at any given point of timewith effect from 1 April 2011. Listed com-panies should have functional websites with

ments on price realisation, completion of ex-pansion plan, performance of newly com-missioned projects, launch of retail outlets,decision to set up new plants through specialpurpose vehicles, issue of work orders, con-tracts awarded for setting up of additionalcapacities, installation of major capital equip-ment, plant upgradation, production disrup-tion, and legal matters and disputes.

Companies have also disclosed reasonsfor better or worse performance due to higherquantum of production and escalating inputcosts. Interestingly, the notes also provideinformation about future outlook in the formof annual growth in volume.

Also, prior period items of expenses orgain could have an impact on profit. Changein accounting policy needs to be factored tofacilitate fair comparison. Information onexceptional items, whether gain or loss, iscritical while passing judgement on the fi-nancial performance of companies.

Capital Market went through the notesto accounts of over 1,200 companies thatare fairly liquid on the trading floor. Thequarter and nine months refer to the periodended December 2010 unless specified oth-erwise. Further, standalone results weretaken into consideration unless specifiedotherwise. The notes to accounts also in-cluded developments that have taken placepost reporting date: 31 December 2010. Thefocus of this exercise was to capture un-usual information disclosed by companiesthat can add value to investors’ informationkitty. For convenience of the readers, com-panies are divided into three categories: largecaps with market capitalisation of Rs 10000



crore and above, mid caps with marketcapitalisation of Rs 500 crore to Rs 10000,and small caps with market capitalisation ofless than Rs 500 crore. This article coversmid-cap companies. The number of compa-nies in the mid-cap and small-cap categorieshas gone up owing to market correction inrecent times. Around 512 mid-cap compa-nies have been examined.

Mid-cap companies seems to be nurtur-ing a slew of subsidiaries and associate com-panies to aggressive develop their busi-nesses. Owing to this, few companies areacting as holding companies, while the ac-tual projects are implemented by subsidiar-ies. Through the notes to accounts, manymid-cap companies have shared vital infor-mation about their subsidiaries, stepdownsubsidiaries and associate companies. Infor-mation shared comprised subsidiaries mak-ing investment in other companies and ac-quiring companies, acquisition of businessthrough subsidiaries, incorporation of sub-sidiaries, incorporation of stepdown sub-sidiaries, restructuring of investment in sub-sidiaries through transfer within group, ad-ditional investment in subsidiaries, mergersand demergers of subsidiaries within groupas part of restructuring, winding up and liq-uidation of subsidiaries, efforts to revive fi-nancially sick subsidiaries, divestment ofinvestment in subsidiaries and stepdownsubsidiaries, substantial dividend receivedfrom subsidiaries, additional capacities de-veloped by subsidiaries and associate com-panies, expansion plans of subsidiaries, le-gal disputes involving subsidiaries, disposalof business by subsidiary, progress of sub-sidiaries and so on.

Further, companies have shared infor-mation pertaining to their joint ventures suchas acquisition of additional equity in JV com-panies and financial support to JV.

Investors need to pay due attention tocomments made by auditors in their limitedreview report. Auditors have made com-ments and observations on various matters.The comments refers to non-provision to-ward diminution in value of long-term in-vestments, non-provision for premium onredemption of outstanding foreign currencyconvertible bonds (FCCBs), non-provisionfor equity exposure in a subsidiary companythat has accumulated losses, unaccrued in-terest under litigation, non-accounting ofminimum alternative tax credit, accountingtreatment of deficit arisen out of acquisitionof specific assets, cost overrun due to de-

sign changes resulting into change in scopeof work, amount withheld by customers,capitalisation of expenditure on clinical tri-als for registration of products in the US andEurope, excess managerial remuneration, in-come tax related matters under dispute, in-frastructure development charges which areunder litigation, short amortisation of thebuild-operate-transfer (BOT) rights, and ex-cise demand.

In certain cases, FCCBs have seen con-version of bonds into equities, while a com-pany has also seen redemption of bonds, re-sulting in loss. In one case, auditors havepointed the accounting treatment: the com-pany has treated gain on conversion of bondsinto equity shares as OI instead of crediting itto the securities premium account. In anotherinteresting case, two firms have not providedfor premium on redemption of outstandingFCCBs. The company has treated it as con-tingent liability as conversion is dependenton future events. The auditors have com-mented on this in their limited review report.Similarly, a few companies have not accountedfor premium payable on redemption. Onewould be accounting for premium payable, ifany, through the securities premium account,which will shield its profit and loss (P&L)account. However, in many cases, auditorshave not made any adverse comments.

In January 2011, the Reserve Bank ofIndia (RBI) came out with a notification in-structing non-banking financial companies(NBFCs) to make a provision of 0.25% onstandard assets. Accordingly, NBFCs havemade provision for the nine months in thequarter ended December 2010. There werethree such firms doing this. One of them hastreated this provision as exceptional item.

Liabilities and provisioning for retirementbenefits like gratuity and pension and leave

encashment benefits is one the very com-mon disclosures made by public sectorbanks. Liabilities arising from gratuity haveincreased due to amendment to the Pay-ment of Gratuity Act, 1972, which has en-hanced gratuity limit. Most banks havemade provision based on estimates and oron ad-hoc basis and are planning to write itoff over five years.

The following company-wise informa-tion should be treated as initial pointers andinvestors need to dig deeper to determinethe real impact of information shared. Thisis the third and last part of a three-partseries on mid caps.Crisil: Consolidated other operating ex-pense included foreign exchange loss ofRs 3.7 crore for the year ended December2010 as against loss of Rs 2.3 crore in theprevious year.� Consolidated OI for the year ended De-cember 2010 included profit of Rs 32.8crore on account of sale of shares in GasStrategies Group and the National Com-modity and Derivatives Exchange. OI in-cluded Rs 25.1 crore from profit on sale ofoffice space vacated as part of relocationplan to new office building in Mumbai forthe year ended December 2010.Havells India: In their report, the auditorshave mentioned diminution in value of thecompany’s long-term investment of Rs715.4 crore in foreign subsidiary companySylvania as there were accumulated losses.Auditors have relied on the management’srepresentations that the diminution in valueof the investment is temporary in natureand, thus, does not require any provision.Mercator Lines: A subsidiary of the com-pany acquired a panamax and a postpanamax vessels. Another subsidiary con-tracted to sell jack-up rig for scheduled de-livery in March 2011.SpiceJet: Unaccrued interest of Rs 7.4crore on inter-corporate deposit of Rs 5crore under litigation at the Bombay HighCourt (HC) since November 2001. The au-ditors have qualified on this matter in theirlimited review report. Had the companyaccrued for outstanding interest, net profitreported would have been lower by Rs 5.9crore and accumulated loss would be higherfor the December 2010 quarter. The man-agement believes that no interest needs tobe accrued at this point in time on accountof its defence in the court proceedings.� During 2010-2011 up to the half yearended 30 September 2010, allotted equity



shares at a price of Rs 25 on conversion of693 FCCBs of US$ 100,000 each. The dif-ference between FCCB liability restated untildate of conversion in accordance with AS-11 and net gain of Rs 5.3 crore on conver-sion price of Rs 25, as per the FCCB offerdocument, recorded as OI. The auditors hadqualified their limited review report for thequarter ended September 2010 as such gainshould have been recorded as adjustmentagainst the balance standing to the credit ofthe securities premium account. The com-pany adjusted the amount to the securitiespremium account and debited the foreignexchange fluctuation by the Rs 5.3 croreduring the December 2010 quarter.Tilaknagar Industries: Acquired 100%stake in Kesarval Springs Distillers Pvt Ltd.� Has franchisee arrangements in somestates. Turnover of such arrangements —Rs 214 crore (Rs 152.8 crore for the previ-ous year) during the December 2010 quarterand Rs 602.1 crore (Rs 362.3 crore for theprevious year) during the nine months endedDecember 2010 — not treated as sales. How-ever, surplus generated out of these arrange-ments included in sales. Thus, total sales ofthe brand were Rs 353 crore (Rs 258.9 crore)during the quarter and Rs 947.5 crore (Rs666.4 crore) during the nine months.Supreme Petrochem: Capital expenditureschemes for cup-grade expandable polysty-rene 20,400 tonnes per annum (tpa), normalEPS (24,000 tpa) and captive gas-basedpower plant (3,500 KVA) at Nogothane,Maharashtra, stated for completion by April2011 as per schedule.Torrent Pharmaceuticals: Torrent PharmaJapan Co, a wholly-owned subsidiary,wound up in October 2010. The entity hadnot commenced commercial activity.� Invested Rs 18 lakh in the equity sharesof wholly-owned subsidiary Torrent PharmaSRL, Romania, and Rs 73 lakh in the equityshares of wholly-owned subsidiary TorrentPharma (UK), United Kingdom.Federal Bank: Net liability arising out ofthe second option for pension estimated at158.7 crore. This liability is proposed to beamortised over five years subject to the ap-proval of the regulator. Pending approval,proportionate liability of Rs 8.5 crore (Rs24.5 crore for the nine months) provided forthe quarter and the balance liability of Rs134.2 crore carried forward.Bajaj Finance: Continues to strengthen itsprovisioning norms beyond the RBI regula-tions by accelerating provisioning to an early

stage of delinquencies based on past experi-ence and emerging trends. Consequently,additional estimated provision aggregated toRs 2.9 crore for the quarter and Rs 38.7crore for the nine months, respectively.Jindal Poly Films: Not opted for amendedAS-11. The firm continued to adjust profit orloss due to exchange difference on long-termforeign currency loans taken for fixed assets inthe P&L account as per AS-11 and recorded asexceptional items. A gain of Rs 98 lakh arisingfrom exchange difference on outstanding long-term foreign currency loans provided.� Two wholly-owned subsidiary companiesJindal Metal and Mining and Jindal Poly FilmsInvestment were incorporated. Further, onesubsidiary in Mozambique, Jindal Resources(Mozambique), was also incorporated.� The board in November 2010 approvedinvestment of up to Rs 660 crore in the eq-uity shares of Jindal India Powertech at par(Rs 10), which is the holding company ofJindal India Thermal Power. Jindal IndiaPowertech is developing a 1,800-MW ther-mal power project in Orissa with an invest-ment of over Rs 9000 crore. After the pro-posed investment, the company will hold astake of 73.7% in Jindal India Powertech.LIC Housing Finance: As per the NationalHousing Bank clarification on provisioning inDecember 2010, created provision of Rs 234.9crore on loans disbursed under fixed-cum-float-ing interest rate over time after utilising excessprovision of Rs 99.9 crore. This resulted inoperating profit being lower by Rs 234.9 crorefor the December 2010 quarter.� OI included profit of Rs 136.6 crore onsale of equity shares of LIC Mututal FundAsset Management Company and LICMututal Fund Trustee Company Pvt Ltdto Nomura Asset Management Strategic In-vestment Pte Ltd.

Oriental Bank of Commerce: For the sec-ond pension option, holds ad-hoc provisionof Rs 356.8 crore pending final actuarial valu-ation and receipt of guidelines from the com-petent authority.� Post amendment in the Gratuity Act, 1972,provided Rs 150 crore including Rs 50 crorefor the December 2010 quarter.GIC Housing Finance: Profit on sale oflong-term investments consists of profit onsale of equity shares of LIC Mutual FundAsset Management Company and LIC Mu-tual Fund Trustee Company Pvt Ltd.� Additional provision for contingencies ofRs 40 crore included additional voluntaryprovision and provision required for newlyintroduced NHB circular of December 2010for housing loans offered under the differen-tial rate of interest schemes.Aurobindo Pharma: Foreign exchangegain or loss represented exchange differ-ences arising on all foreign currency trans-actions. This included gain of Rs 3.2 croreon restatement of FCCBs.� In their limited review report, auditors havecommented on non-provision of premium onredemption of outstanding US$ 139.2 millionzero-coupon FCCBs. As per the management,it is contingent in nature as determination andcrystallisation of liability are dependent onthe outcome of uncertain future events notwithin the control of the company.� Incorporated new stepdown subsidiariesAurobindo Pharma (Romania), AurobmdoPharma (Poland), and Aurobindo Pharma.� SIA Aurobindo Baltics, Latvia, a stepdownsubsidiary, liquidated on 26 November 2010.� The group sold its entire stake in CephazonePharma LLC, a joint venture of one of its over-seas subsidiaries in the US. Also, entered intoa definitive agreement to divest 80.5% stake inone of the 100% subsidiaries, AurobindoDatong Bio Pharma Co Ltd, China, from 30November 2010. Thus, the balance stake of19.5% in Aurobindo Datong Bio will be stra-tegic to ensure uninterrupted supply of rawmaterials at competitive prices. The impact ofthese two arrangements has been disclosed as‘Exceptional item’.Natco Pharma: Following the commentsmade by the auditors on non-accounting ofminimum alternative tax credit of Rs 3.5crore and Rs 9.9 crore for the quarter andnine months ended December 2010, respec-tively, will review the position at the endof 2010-11.� Sales were net of exchange fluctuation gainof Rs 27.7 lakh for the quarter.



Prism Cement: In December 2010, resumedproduction of clinker at Unit-II at Satna inMadhya Pradesh, which was temporarily sus-pended due to accident in the blending silo.Financial Technologies (India): As partof its core business strategy, promotes andinvests in new ventures that utilise its tech-nological capabilities and domain expertisecreating world-class enterprises. Investmentin each venture is assessed for its risks andreturns after the ventures start ramping upoperations in about two to four years. Aspart of its non-linear business model, thecompany will continue to unlock value bybroadening investor base of its ventures.� Investments aggregating to Rs 958.5 croreand debts and other recoverable aggregatingto Rs 104.9 crore in certain subsidiaries and ajoint venture company, which presently haveaccumulated losses but are expected to re-cover and have their values unlocked in nearfuture as they are already at various stages ofexecuting business plans and operations.Thus, provision for other than temporarydiminution of Rs 56.9 crore made during theearlier year considered to be adequate.� OI consisted of foreign exchange gain Rs 3crore, profit on sale of investments Rs 44.2crore, and dividend income Rs 7.8 crore.� Has cash and bank balances of Rs 114.9crore and investment in mutual funds ofRs 959 crore.Thermax: Through its wholly-owned sub-sidiary Thermax Denmark ApS acquired100% stake in Danstoker A/S, Denmark, andEjendomsanpartsselskabet Industrivej Nord,Denmark, for Rs 129.6 crore. In turn,Danstoker A/S has wholly-owned subsid-iaries Omnical Kessel & ApparatebauGmbH, Germany, and Danstoker, UK. As aresult of these acquisitions, the companyowns boiler manufacturing facilities in Den-mark and Germany.Chromatic India: The management is ofthe opinion that there is no impairment lossfor its factory at Dombivli near Mumbai.Corporation Bank: Provision for esti-mated liability on account of pension op-tion arising out of the ninth bipartite settle-ment made at Rs 55 crore on a provisionalbasis pending guidelines.UCO Bank: Based on estimation, Rs148.5 crore provided during the December2010 quarter and Rs 371.5 crore for thenine months on account of employee ben-efits such as pension, gratuity, leaveencashment, leave travel concession, andsick leave pending necessary guidelines.

sequent to wage revision, ad-hoc provisionof Rs 225 crore and Rs 390.7 crore made forthe quarter and nine months, respectively,towards pension liabilities.Bank of Maharashtra: For liability to-wards retirement benefits of pension, gratu-ity and leave encashment, an estimated pro-vision made in a phased manner and, ac-cordingly, Rs 45 crore provided for in theDecember 2010 quarter in addition to Rs60.4 crore provided up to the half year endedSeptember 2010.� Changed the basis of provisioning for se-cured sub-standard assets from 10% to 15%during the quarter ended September 2010.Due to this, net profit for the nine monthslower by Rs 20.38 crore.Elder Pharmaceuticals: Exceptional item ofRs 1.2 crore for exchange loss on quarterlyinstalment of external commercial borrowing.Punjab & Sind Bank: Post amendment ofthe Gratuity Act. 1972, provided Rs 5.7crore for the December 2010 quarter and Rs17.3 crore for the nine months ended De-cember 2010 pending approval from the regu-latory authority for amortisation of total li-ability amounting to Rs 115.6 crore, as peractuarial valuation, over five years. Further,Rs 50 crore provided on ad-hoc basis forpension liability.Maharashtra Elektrosmelt: Employeecost increased due to additional provisionof Rs 72.6 lakh for the quarter and Rs 4crore for the nine months for employee-re-lated benefit compared with the reversal ofestimated provision for salaries and wagesrevision of Rs 15.3 crore in the correspond-ing period of the previous year (Rs 9.9 crorefor the quarter).� A refund of Rs 10.3 crore received fromthe Maharashtra State Electricity Distribu-tion Co during the period ended December2010 (Rs 10.1 crore for the previous pe-riod), as per the Maharashtra ElectricityRegulatory Commission order to high-ten-sion consumers shown as, ‘Exceptional item’.Andhra Bank: Employee cost included Rs157.5 crore made on ad-hoc basis for newpension option pending crystallisation ofliability and Rs 52.5 crore towards gratuityliability consequent to enhancement of eli-gibility to Rs 10 lakh for the period endedDecember 2010.State Bank of Mysore: To achieve the RBIstipulated provisioning coverage ratio of70%, revised accounting policy of NPA pro-visioning for the quarter ended June 2010,resulting in additional provision of Rs 92.1

Provision included Rs 52.1 crore for thequarter and Rs l24.7 crore for the ninemonths towards second pension option.State Bank of Travancore: The matter ofamortisation of liability towards gratuity andpension arising on account of wage revision,another option for pension, and enhance-ment of the limit of gratuity taken up withthe appropriate authority. In the interim,provision of Rs 93.9 crore made.Dhanlaxmi Bank: As per the AgriculturalDebt Waiver and Debt Relief Scheme, receivedRs 3.1 crore from the RBI on account of loansto small and marginal farmers out of eligibleRs 4.3 crore. The balance amount of Rs 1.2crore showed as receivables and classifiedunder, ‘Advances’.Dena Bank: Following the exercise of thesecond option for pension arising out of theninth bipartite settlement and amendmentto the Payment of Gratuity Act, 1972, esti-mated the liability pending final actuarialvaluation. Considering amortisation of theliability over five years commencing from2010-11, made an ad-hoc provision of Rs70 crore during the December 2010 quarter.Central Bank of India: Consequent tochange in rates of provision for non-perform-ing assets (NPAs), NPA provision increasedby Rs 130.2 crore during the nine monthsended December 2010. Profit after tax lowerby Rs 86.9 crore for the nine months.� Pending actuarial valuation, an ad-hocprovision of Rs 30 crore and Rs 10 croremade for gratuity and leave encashment,respectively, for the December 2010 quar-ter. Gratuity and leave encashment stoodat Rs 65 crore and Rs 34 crore, respec-tively, for the nine months.� Pending actuarial valuation and ascertain-ment of impact on retirement benefits con-



crore. Discontinued the policy of additionalprovisioning since the half year ended Sep-tember 2010 and reverted to provisioning,as per the RBI norms. Also holds floatingprovision of Rs 84.4 crore over and abovethe provision amount required as per theRBI guidelines on income recognition, assetclassification and provisioning on advances.IVRCL Infrastructures & Projects: Theresults for the nine months included cred-its of Rs 40 crore relating to the earlier yearsand accounted during the first quarter endedJune 2010.� FCCBs of US$ 7.6 million (Rs 34.1 crore)were redeemed and together with applicablepremium aggregated to an outflow of Rs 48.7crore during the quarter.� Purchased equity shares of Alkor Petrooand IVRCL Building Products from its sub-sidiary, IVRCL Assets & Holdings, makingthem direct subsidiaries of the companyduring the quarter.Indian Overseas Bank: Provision for li-ability towards employee benefits (pension,gratuity, leave encashment) estimated as perrevised AS-15 and apportioned on propor-tionate basis. Rs 22.5 crore charged to theP&L account for transitional liability for thequarter. The balance of unrecognised transi-tional liability stood at Rs 110.5 crore endDecember 2010.� Pending actuarial valuation, pension liabil-ity estimated and provision of Rs 108 croremade for the quarter and Rs 324 crore for thenine months. Pension liability arising on ac-count of second option proposed to be amor-tised over a period not exceeding three years.� In 2009-10, took over specific assets andliabilities of a bank with the approval of theRBI. The deficit, representing excess of li-abilities over assets taken over amounting toRs 246.5 crore, has to be absorbed over threeyears, as permitted by the RBI. Absorbed Rs82.1 crore in the June 2010 quarter and thebalance deficit of Rs 82.1 crore to be absorbedbefore 31 March 2012. As per the auditors’comment in their review report, total deficitshould have been written off.State Bank of Bikaner and Jaipur: Anestimated liability of Rs 622 crore deter-mined by the actuary for retirement ben-efits arising on account of wage settlementon pension and gratuity and also on ac-count of second option of pension andincrease in the upper limit of gratuity. Theliability would be amortised over threeyears, commencing from 2010-11. Provi-sion of Rs 51.8 crore for the quarter and

Rs 155.5 crore for the nine months endedDecember 2010 created.Vijaya Bank: Provision for the second pen-sion option and gratuity on account of en-hancement in ceiling based on actuarial valu-ation amortised over five years pending fi-nal decision. Accordingly, Rs 95.3 crore pro-vided in the December quarter.Indian Bank: Rs 23 crore charged to theP&L account for transitional liability onproportionate basis for the quarter, as perrevised AS-15. Remaining unrecognised tran-sitional liability is Rs 115 crore.� The proportionate sum of Rs 8.2 crore fortotal additional gratuity fund requirementof Rs 164 crore, as per actuarial valuationarising on account of amendments to thePayment of Gratuity Act, 1972, providedduring the quarter pending approval foramortisation over five years.� The proportionate sum of Rs14 crore forestimated total additional pension (secondoption) liability of Rs 280 crore providedduring the quarter pending receipt of ap-proval for amortisation over five years.� NPAs of Rs 347.4 crore assigned to assetreconstruction companies. In line with theguidelines of the RBI, surplus of Rs 46.1crore arising out of this sale not recognisedin the P&L account.Geojit BNP Paribas Financial Services:Profit after tax of Rs 45.7 crore for the ninemonths included dividend of Rs 17 crore(Rs 10 crore for the previous period) re-ceived from a wholly-owned subsidiary.Manappuram General Finance & Leas-ing: Made provision of Rs 12.5 crore, being0.25% of standard assets, as per the notifi-cation issued by the RBI in January 2011.South Indian Bank: The liability for re-tirement benefits of pension and gratuity

and the second option for pension estimatedat Rs 147.3 crore. This would be amortisedover three years commencing from FY 2010-11. Rs 12.2 crore charged to the P&L ac-count during the quarter. Auditors have com-mented on the issue.Zydus Wellness: Invested Rs 30.5 crorein capital of partnership firm ZydusWellness, Sikkim.Phoenix Mills: Butula Farms Lands PvtLtd became a subsidiary during the quarter.Emami: Emami Overseas FZE, UAE, andPharma Derm SAE Co, Egypt, became sub-sidiary and stepdown subsidiary, respec-tively, of Emami International FZE duringthe December 2010 quarter.Shriram City Union Finance: The RBIissued notification in January 2011 askingnon-banking financial companies (NBFCs)to make a provision of 0.25% on standardassets with immediate effect Accordingly,made first-time provision of Rs16.1 croreincluding provision of Rs 1.7 crore on in-crease in standard assets during the quarter.REI Agro: As per the order of the HC, ad-justed in the securities premium account Rs4.4 crore for deferred tax assets, computedas per AS-22.Welspun Corp: As per the shares purchaseagreement entered in May 2010, acquiredthrough its subsidiary 50 01% shares in pipeand coating joint venture (JV) companiesWelspun Middle East Pipes Company LLCand Welspun Middle East Pipes CoatingCompany LLC formed in Saudi Arabia withinvestment of US$ 58.3 million by way ofUS$ 14.6 million as equity and US$ 43.7million as debt during the December 2010quarter. The JV companies acquired pipemanufacturing and coating assets atDammam, Saudi Arabia.Wockhardt: Outstanding liabilities restruc-tured under the corporate debt restructuringscheme. For unilaterally terminated contractspertaining to crystallised derivatives andhedging liabilities are disputed amount pay-able presently but not ascertainable and,hence, not provided.� Exceptional items for the quarter includedamount received on release of escrow fordivestment of the animal health business,receipt of claim of insurance, reversal of ex-cess provision made on account of settle-ment of loan and disputed derivatives liabili-ties, and for loss of assets.TVS Motor Company: As per amendedAS-11, difference in the foreign exchangerates for ECB adjusted to the cost of capital



assets acquired through such loans. Exchangedifference for ECB other than relating toacquisition of capital assets adjusted to theforeign currency monetary item translationdifference account.� Invested Rs 28.4 crore in preference sharesof TVS Motor Services, Chennai, during theDecember 2010 quarter.Aptech: Approval of the Central govern-ment pending for remuneration of Rs 46.8lakh paid in excess of limits prescribed un-der the Companies Act, 1956, to managingdirector in 2009-10.� Voluntarily closed its operations in AptechManpower Services from 31 December 2010.National Fertilizer: In the process of of-fering an alternative optional employees’social rehabilitation scheme in place of theexisting social security scheme from 1 Janu-ary 2010. Differential impact of actual valu-ation, if any, would be known after receiptof response from employees and providedat the year end.SJVN: Pending final determination of tariffby the Central Electricity Regulatory Com-mission, sales for the quarter provisionallyrecognised.� Pending claims of Nathpa Jhakri Joint Ven-ture on Nathpa Jhakri Hydro Power Stationsettled during the December 2010 quarter,resulting in additional capitalisation of Rs54.8 crore to fixed assets and provision fordepreciation of Rs 12 crore for earlier years.� Interest expenditure for the December 2010quarter included provision of Rs 19.4 croreon account of settlement of pending andadditional claims of contractors.� Pending implementation of wage revisionof employees, provision of Rs 2.8 crore madefor the quarter on reasonable estimate basis.Hexaware Technologies: Exceptionalitems included profit on sale of surplus as-sets amounting to Rs 63.6 crore.� Entered into a large IT services contract ofUS$ 110 million over five years during thequarter ending June 2010. Contract includesabsorbing certain identified employees of thecustomer along with related obligation. Ac-cordingly accounted for such obligations,amounting to Rs 41.2 crore based on thecrystallised restructuring plan, during theyear. This has been booked under ‘Excep-tional items’.Tamil Nadu Newsprint & Papers: Enteredinto forward contracts to hedge future im-ports and future exports. The marked-to-market (MTM) notional gain of Rs 4.7 croreon such contracts outstanding recognised in

the hedge reserve account, as per AS-30.Punj Lloyd: A subsidiary, PL Engineering,acquired 100% stake in Punj Lloyd Engi-neering Pte Ltd, Singapore, in October 2010.� Increased its stake in Dayim Punj LloydConstruction Contracting Company from49% to 51%.� A wholly-owned subsidiary, Punj Lioyd PteLtd., Singapore, acquired 100 % subsidiarycompany, Punj Lloyd Infrastructure Pte Ltd.� A wholly-owned subsidiary, Punj Lloyd PteLtd, Singapore, incorporated a 100 % sub-sidiary company, PLI Vendtures, Mauritius.� A stepdown subsidiary, Sembawang En-gineers and Constructiors Pte Ltd, incorpo-rated a subsidiary company, SembawangTianjin Pte Ltd., Singapore.� A stepdown subsidiary, Sembawang Engi-neers and Constructiors Pte Ltd, incorporateda subsidiary company, Sembawang (Tianjin)Investment Management Co. China.� A wholly-owned stepdown subsidiary,Punj Lloyd Infrastructure, incorporated a100 % subsidiary company, Punj LloydSolar Power.� Incorporated a 51% subsidiary company,PLI Ventures Advisory Services Pvt Ltd,during the quarter� A wholly-owned subsidiary, Punj LloydPte Ltd, Singapore, divested its stake in asubsidiary, Techodyne International, from2 February 2011.� The auditors have qualified their reportfor the quarter ended December 2010 andfor 2009-10 regarding accounting of claim ofRs 243 crore on a contract. Based on themanagement´s assessment, the cost over-runarising due to design changes and consequentchanges in the scope of work on a projectand also non-accounting of liquidated dam-ages amounting to Rs 65.4 crore deducted

by the customer on delay in execution isattributable to the customer. The manage-ment, based on experts’ inputs, is confidentof recovery of claim exceeding the recognisedamount, which it would pursue once theproject is fully executed and is also confi-dent of waiver of liquidated damages.� The auditors have commented on the ac-counts for the quarter ended December2010 and for 2009-10 regarding deductionsmade and amount withheld aggregating toRs 58.8 crore by some customers and alsowork-in-progress inventory of Rs 3.1crore. The management is taking appro-priate steps for recovery.Panacea Biotec: Launched new products,Lenomust capsules (multiple myloma forblood cancer) under its special business unit(SBU), OncoTrust; Renhold tablets (pro-tein for dialysis patients) under its SBU onnephrology; Exeroz (reduction ofcholestrol) under its SBU, Dia Alpha; andFiberfos Power and Gush Power 90gm(constipation) under its SBUs, Growcareand Procare, respectively.� Its wholly-owned subsidiary, Best OnHealth, acquired 100% stake in Best onHealth Foods by investing Rs 5 lakh.� Auditors have commented on the non-pro-vision of proportionate premium on redemp-tion of convertible bonds in 2009-10 (out-standing US$ 38.8 million). As per the man-agement, bonds are redeemable only if thereis no conversion, the likelihood of which can-not be ascertained presently. Hence, premiumis contingent in nature and disclosed as con-tingent liability in the earlier years. Further,proportionate premium, amounting to Rs 4.2crore, not been provided during the quarterended December 2010. The total non-pro-vided redemption premium amounted to Rs68.5 crore for the period up to 31 December2010. In the eventuality of bonds not gettingconverted, premium on redemption would beadjusted out of the securities premium ac-count and would not have any consequentialimpact on the P&L account.� On capitalisation of expenditure on clinicaltrials for registration of products in the USand Europe, the company believes theseproducts would be commercially viable andthere is no uncertainty that may lead to notsecuring registration. Rs 35.9-lakh expendi-ture capitalised during the quarter ended De-cember 2010 on similar grounds. Total amountof capitalisation stood at Rs 50.2 crore up to31 December 2010. Auditors have commentedon this accounting treatment.



� Approval for excess managerial remunera-tion of Rs 1.46 crore paid for FY 2008-09received, while approval for Rs 2.3 croreawaited. Auditors have commented on thismatter in their report for the FY 2009-10.Marico: As a matter of abundant caution andfinancial prudence, made a provision of Rs29.3 crore during FY 2009-10 for 75% ofpossible excise obligation that may arise inthe event of unfavourable outcome in the dis-pute about coconut oil packed in containersize up to 200 ml and cleared after 3 June2009. This is being contested by the com-pany. Based on legal opinion obtained, prob-ability of success in the matter is more likely.In terms of AS-29 on provisions, contingentliability and contingent assets, possible obli-gation could be in the nature of contingentliabilities, which need not be provided for.Has continued its stand and, accordingly,made provision of Rs 9.5 crore (Rs 11 crorefor the previous period) and Rs 26.6 crore(Rs 28.2 crore for the previous period) forthe quarter and the nine months ended De-cember 2010, respectively, which is includedin ‘Other expenditure’. If liability is treatedas contingent liability, profit before tax forthe quarter and nine months would have beenhigher by the same amounts. Auditors havequalified their audit report for 2009-10 andlimited review reports for the quarters ended30 June 2010, 30 September 2010 and 31December 2010. According to the auditors,this treatment is not as per AS-29.Redington India: Redington InternationalMauritius’s subsidiary Redington Interna-tional (Holdings), Cayman Islands, incor-porated Redington Turkey Holdings SARL,Luxembourg, as a wholly-owned subsidiary,which, in turn, acquired 49.4% equity inArena Bilgisayar, Istanbul, in November2010, with full control over the composi-tion of the board of directors.� Invested Rs 2 crore in the equity capitalof its wholly-owned subsidiary, Nook Mi-cro Distribution, and a further investmentof Rs 1.9 crore was made in January 2011.� A stepdown subsidiary, Redington AngolaADA, incorporated during the December2010 quarter.Icra: Current investments valued at lowerof cost and fair market value and reversal indiminution in carrying value of the invest-ments credited to the P&L account.Rajesh Exports: Order book position stoodat Rs 5465 crore end December 2010.� Launched seven more Shubh Jewellersstores in Banglore under the gold revolu-

tion. The company has emerged as the larg-est retail jeweller in Karnataka. Also launcheda jewellary service center in Banglore, underthe brand name, Shubh Service Center.� R&D division developed several new de-signs and processes.Prestige Estates Projects: Invested in equityshares of various companies including PrestigaeBidadi Holding Pvt Ltd, Valdel xTentOutsourcing Solution Pvt Ltd, and Vijaya Pro-duction Pvt Ltd, during the quarterMOIL: Due to the change in accountingpolicy for valuation of slag from 1 April2010, profit after tax reduced by Rs 68 lakhand Rs 3.9 crore, respectively, for the quar-ter and nine months.Suzlon Energy: Indian Wind Energy Asso-ciation, of which Suzlon is a member, hasfiled a civil appeal in the Supreme Courtagainst an order of the Appellate Tribunalfor Electricity to levy infrastructure devel-opment charges (IDC) proposed by theTamil Nadu State Electricity Board. Theauditors have commented about non-provi-sion of the IDC charges aggregating for Rs5965 crore on 31 December 2010.� Not provided for proportionate pre-mium on redemption of convertible bondsas this is contingent in nature. The pro-portionate premium was around Rs 527.3crore on 31 December 2010. The auditorshave commented on this matter in theirlimited review report for the quarter. Thecompany has securities premium of Rs5306 crore, which is adequate to cover thecost of proportionate premium in case thecontingency materialises.� In April 2010, convened meetings ofbondholders of each of the series, who ap-proved the respective resolutions put tothem. Accordingly, post receipt of regula-

tory approvals, changed the conversionprice of the phase I bonds from Rs 359.68to Rs 97.26 per equity share and for phaseII bonds from Rs 371.55 to Rs 97.26 perequity share. The revised floor price ofphase I and phase II bonds is Rs 74.025per equity share. The fixed exchange ratewas changed to US$ 1=Rs 44.6 from US$1=Rs 40.83 for phase I bonds and US$ 1 =Rs 39.87 for phase II bonds. Incurred Rs37.28 crore as consent fee to bondholdersand other cost, which is disclosed under,‘Exceptional items’ for the nine months.� In the process of seeking regulatory ap-proval, for implementing a scheme of arrange-ment and restructuring. The scheme includesde-merger and transfer of the power genera-tion division and the project division fromwholly-owned subsidiaries to other twowholly-owned subsidiaries. Subsequently,both wholly-owned subsidiaries will be amal-gamated with Suzlon Energy. The appointeddate fixed for the purpose was 1 April 2010.Jaiprakash Power Ventures: The resultsincluded the performance of the 300-MWBaspa II Project and 400-MW VishnuprayagProject. Both the Baspa-ll and Vishnuprayaghydro electric projects recorded the highestlevels of power generation since commence-ment of commercial operations, given thehydrology and high level of plant availabil-ity during the nine months.� The company and its subsidiaries and as-sociates are implementing a 13,020-MW(thermal 8,100 MW and hydro 4,920 MW)additional power-generation capacity. Haveraised resources by securitisation of receiv-ables of operating projects and also otherfinancial assistance. This has resulted in ad-ditional interest cost, leading to relativelylower increase in net profit.� Jaypee Karcham Hydro Corporation, anassociate company implementing the 1,000-MW Karcham Wangtoo hydro electricproject, became a subsidiary during the De-cember 2010 quarter. The project achievedsignificant milestone when it closed the di-version tunnel and commenced filling of thewater conductor system. The KarchamWangtoo project was scheduled to com-mence commercial operation of its first unitin March 2011.� Subsidiary Sangam Power GenerationCompany has since executed the boiler tur-bine and generator contracts for three unitsof 660 MW each for its super critical ther-mal power project at Karchana, Allahabad,Uttar Pradesh.



� Foreign exchange fluctuation on out-standing foreign currency loans accountedfor as per amended AS-11. Foreign ex-change fluctuation for the Baspa II Projectand Vishnuprayag Project are reimburs-able in the tariff.Gateway Distriparks: Based on opinionsobtained, the management has taken a viewthat the provisions of Section 80-IA(4)(l)of the Income Tax (IT) Act, 1961, have beenfulfilled and the company is eligible for taxholiday under the IT Act for container freightstation activities. Consequently, income taxliability has been determined under mini-mum alternate tax (MAT). Has taken MATcredit of Rs 2.9 crore during the quarter (Rs6.5 crore for the nine months). The creditcan be set off against future tax liability.Accordingly, Rs 25.5 crore (including Rs 19crore for 2009-10) treated as loans and ad-vances on 31 December 2010.� The deputy commissioner of income taxissued an order for the assessment year 2008-2009 (financial year 2007-08), disallowingclaim of deduction under Section 80-IA (4)(l) of the IT Act and issued notice demandingrecovery of additional income tax and inter-est aggregating to Rs 26.9 crore and initiatedproceedings to levy penalty during the quar-ter. The company is in the process of filingappeal before the commissioner of incometax (appeals). Based on tax consultants’ opin-ion, the management is of the opinion thatthe company is entitled to deduction and,hence, no provision for demand made.� The company and its subsidiary com-pany, Gateway Rail Freight (GRFL), areinvolved in an arbitration proceeding withContainer Corporation of India (Concor)for agreements entered into for operationof container trains from the inland containerdepot and rail siding of the company atGarhi Harsaru, Gurgaon. Concor has raisedclaims on the company and GRFL on vari-ous issues. Based on legal opinion, the man-agement has taken the view that these claimsare at a preliminary stage and the questionof maintainability of the alleged disputesis yet to be determined and is not sustain-able. Pending arbitration, parties are main-taining status quo.Jyothy Laboratories: The board took noteof expansion plan of its subsidiary, JyothyFabricare Services, and granted in-principleapproval to raise up to Rs 150 crore throughequity and or debt through private placement.Biocon: Biocon SA entered into a strategicagreement with Pfizer, Ireland, for worldwide

commercialisation of biosimilar insulin prod-ucts during the quarter. Biocon SA will beresponsible for the clinical development andsupply of these biosimilar insulin products.Television Eighteen India: Has certainlong-term investment of Rs 784 crore in-cluding quoted equity shares of Rs 274.6crore. The market value of quoted equityshares stood at Rs 65.3 crore on 31 Decem-ber 2010. As per the management, consider-ing the long-term strategic involvement andproposed restructuring, no provision con-sidered necessary other than temporary dimi-nution in value or these investments.Godrej Properties: OI included Rs 15crore as part dilution of equity stake inGodrej Buildwell Pvt Ltd to India RealtyExcellence Fund and others for Rs 5 croreand Godrej Sea View Properties Pvt Ltdto HDFC Porfolio Management Servicesfor Rs 10 crore.Century Plyboards (India): OI includeddividend from a subsidiary amounting to Rs5.9 crore for the nine months ended Decem-ber 2010 as against Rs 22.1 crore during theprevious period.Tulip Telecom: Formed a wholly-ownedsubsidiary company, Tulip Data Center Ser-vices Pvt Ltd, in Bangalore for the proposedexpansion of its business operation in en-terprise data services.� Opted for amended AS-11. Added Rs 18.9crore to fixed assets on account of fluctua-tion in rate of foreign currency long-termassets and liabilities by crediting Rs 7.5 croreto the general reserve for foreign exchangeloss from 7 December 2006 to 31 March2010 and Rs 11.3 crore of foreign exchangeloss between 1 April 2010 to 30 June 2010as on 30 June 2010. Had the option notbeen exercised, net profit would have been

lower by Rs 3.4 crore for the quarter andlower by Rs 1.1 crore for the nine months.KPIT Cummins Infosystems: Designatedoutstanding forward exchange contracts forcertain firm commitments and forecast trans-actions as cash flow hedges as per AS-30.Changes in fair value of forward exchangecontracts, if effective, recognised directly inreserves and ineffective portion recognisedimmediately in the P&L account.� OI included foreign exchange gain of Rs2.7 lakh and loss of Rs 5.5 crore, respec-tively, for the quarter and nine months (lossof Rs 3 crore and Rs 12.3 crore for the pre-vious periods, respectively).Mahindra & Mahindra Financial Ser-vices: As per the RBI notification issuedin January 2011 instructing NBFCs tomake provision of 0.25% on standardsassets with immediate effect, made a first-time provision of Rs 28.4 crore as ‘Ex-ceptional item’ for the nine months. Thisincluded provision of Rs 2.8 crore for theDecember 2010 quarter.Delta Corp: Not earned income from leaserental and real estate consultancy, whichwere there in the quarter ended December2009, amounted to Rs 5.9 crore and Rs 9crore, respectively, during the quarterended December 2010.� Incorporated two wholly-owned subsid-iary companies and acquired two stepdownsubsidiary companies for Rs 1.1 crore dur-ing the December 2010 quarter.Tech Mahindra: A customer restructuredlong-term contracts with the company from1 April 2009 involving changes in commer-cial including rate reduction and other agreedcontract terms. As per the amended con-tracts, the customer has paid restructuringfees of Rs 968.1 crore. The services underthe restructured contracts would continueto be rendered over the life of the contract.The restructuring fees received would beamortised and recognised as revenue overterm of the contract on a straightline basis.Rs 150.3 crore recognised as revenue for thenine months ended December 2010 and thebalance of Rs 617.3 crore carried forwardand disclosed as deferred revenue.Hindustan Media Ventures: Hindustan, aHindi daily, was launched in Gorakhpur inUttar Pradesh from the company’s newprinting facility during the quarter.� Acquired the Hindi business undertakingfrom its holding company, HT Media, from1 December 2009 and, hence, results are notcomparable year on year.



Noida Toll Bridge Company: Has legaldispute with the municipal corporation ofDelhi over payment of monthly license feeson outdoor advertisements. So far, has paidRs 1 crore to corporation in compliance withthe court order and booked it under, ‘Ad-vance’ till the disposal of pending case.Info Edge (India): Is still to utilise fullyfunds raised through the initial public offer-ings (IPO) in November 2006.� Follows intrinsic value method for em-ployee stock option-based compensation.Had the fair value method been used foroptions vested during the nine months andquarter ended December 2010, profit aftertax for the period and quarter would havebeen lower by Rs 5.6 crore and Rs 1.8 crore,respectively (Rs 4 crore and Rs 2.2, crorerespectively, for the previous periods).Titagarh Wagons: Implemented a new en-terprise resource planning system during theearlier quarter, requiring a change in themethod of valuation of raw materials andcomponents and stores and spares parts in-ventories from the first-in-first-out toweighted average basis. Had the companycontinued to use the earlier method, charge tothe P&L account for the quarter and ninemonths would have been lower by Rs 33.3lakh and higher by Rs 52.4 lakh, respectively.Shoppers’ Stop: On account of termina-tion of franchisee agreement with CrosswordBookstores (CBL), a wholly-owned subsid-iary, operations of Crossword have beenhanded over to CBL at book value from 1October 2010. Change (increase or decrease)in inventories included transfer of inventoryto CBL aggregating to Rs 23.4 crore. Hence,results are not comparable.Triveni Engineering and Industries: Thecourt process for sanction of scheme of ar-rangement proposing the demerger thesteam turbine business of the company toits wholly-owned subsidiary company,Triveni Turbine, from 1 October 2010 isunder progress.� In January 2011, signed renewal of its li-cence agreement for 12 years with LufkinIndustries Inc., Lufkin, Texas, US. The newagreement covers manufacture of an ex-tended range of steam turbine gear boxes upto 62 MW, gear boxes for compressors, loadgear boxes for gas turbines and gear boxesfor mechanical drives (pumps, fans andblowers). Geographical coverage under theagreement also extended.Petronet LNG: Sourced additional 11 mil-lion tpa (mtpa) LNG for 2011-12 and 2012-

13 and offtake arrangements finalised.� The board approved expansion of theKochi terminal to six mtpa. The work orderwould be awarded shortly and terminal isexpected to be commissioned by the thirdquarter of 2012-13.� Also awarded contracts for constructionof additional jolly and associated facilitiesat Dahej in Gujarat. Expected to be commis-sioned by the second quarter of 2013-14.Atlanta: The auditors have qualified theresults for short amortisation of the BOTrights of the Mumbra bypass road for Rs9.5 crore and non-provision of MTM lossof Rs 6.7 crore. Based on legal opinion, thecompany has amortised the BOT right for24 years, one month and 17 days as againstthe claim period, which is far in excess. Thematter is pending adjunction before the ar-bitral tribunal. Had the MTM losses beenprovided and BOT rights amortised basedon the revised government notification, netblock of the assets would have been lowerby Rs 9.5 crore and profit would have beenRs 11.9 crore as against reported profit ofRs 28.2 crore for the period.� Operating income from toll collection at theMumbra bypass road declined by approxi-mately Rs 14.6 crore in the December 2010quarter. This estimate is based on average tollcollection in the earlier period on account ofsuspension of toll collection for 115 days onaccount of concretisation of toll road.� Other operating income related towriteback of provisions no longer requiredfor projects.Dish TV India: Life of consumer premiseequipment (CPE) for depreciation estimatedby the management as five years. However,in certain cases, one-time advance contribu-tion towards CPE in the form of rental

recognised over three years. In the processof streamlining depreciation practices.� Not recognised deferred tax assets inview of the substantial losses and no vir-tual certainty supported by convincingevidence that sufficient future taxable in-come will be available.Divi’s Laboratories: Implementing aproject for setting up a new unit, the DSNSEZ unit, at Visakhapatnam at an estimatedcost of Rs 200 crore.Tata Teleservices (Maharashtra):Adopted amended AS-11 in the last quarterof 2008-09. Adjusted foreign exchange lossof Rs 61 lakh and gain of Rs 5.5 crore for thequarter and nine months ended December2010 compared with gain of Rs 11.9 croreand Rs 20.8 crore for the quarter and ninemonths ended December 2009 against car-rying value of fixed assets.� Deferred tax not recognised in view of thetax holiday enjoyed and on considerationsof prudence, as set out in AS-22.Reliance MediaWorks: After the end ofthe December 2010 quarter, FCCBs wereredeemed on 25 January 2011, resulting in acrystallised loss of Rs 14.8 crore.Sterlite Technologies: The Customs, Ex-cise and Service Tax Appellate Tribunal up-held a demand of Rs 188 crore including pen-alties in pending excise matter during 2005-06. The auditors have expressed their quali-fication on the matter. The company is con-testing this case and the matter is pendingwith the Supreme Court.Lanco Infratech: Power generating units oftwo subsidiaries changed their depreciationpolicy during the quarter, from writtendownvalue to the straightline method, with retro-spective effect at the rates specified in Sched-ule XIV of the Companies Act, 1956, on ex-perts’ technical inputs and to align the depre-ciation method with other power companieswithin the group and industry. Consequently,depreciation lower by Rs 88.2 crore for thequarter. Further, charge for the quarter is af-ter adjusting writeback of Rs 160.7 crore forthe six months ended September 2010. Also,depreciation aggregating to Rs 141.4 crore forthe period up to 31 March 2010 written backand presented as OI. Consequently, net profithigher by Rs 133.1 crore for the quarter andnine months ended December 2010.� Entered into a binding agreement to ac-quire Griffin Coal Mine in Australia duringthe quarter. The management expects totake control of the mine after completingnecessary formalities.



� Remuneration of Rs 1.8 crore till yearended March 2010 paid to directors of cer-tain subsidiary companies in excess of thepermissible remuneration. Approval fromthe Central government is pending and noadjustments made in accounts.Jagran Prakashan: Post migration to In-ternational Financial Reporting Standards,which is likely over the next three years orso, the company would not be required toamortise title but will need to test it for im-pairment annually or earlier if there arises atriggering event in the interim period. Thecompany believes that, based on its busi-ness projections, no impairment on suchreview will arise and, accordingly, it has notamortised the value of the title of Rs 17crore in its interim financial results. Thisaccounting treatment is not in sync with AS-26, which requires amortisation of intangibleassets over their estimated useful life.Binani Cement: The cement industry’sperformance adversely affected on accountof the substantial drop in cement prices andrising input costs during 2010-11.� Various projects in India and China and anew project in Mauritius are progressing asper schedule.IVRCL Assets & Holdings: Incorporated asubsidiary, IVRCL Chandrapur Tollways,during the December 2010 quarter.� Sold investments in two of its subsidiaries,Alkor Petroo and IVRCL Building Products.AIA Engineering: The company has ac-quired 70% equity stake of DCPL Found-ries Pvt Ltd, Trichy.� A company, Wuxi Weigejia Trade Co, wasformed in China during the December 2010quarter. The new company is a wholly-owned subsidiary of Vega Industries (MiddleEast) FZE, UAE. Vega Industries is awholly-owned subsidiary of the company.Pipavav Shipyard: As per the revised guide-lines for the shipbuilding subsidy issued inMarch 2009, the company is eligible for sub-sidy at 30% of contract price for the exportorder received for vessels for which contractswith customers were signed on or before 14August 2007. Accordingly, subsidy of Rs 30.6crore for the quarter (Rs 38.6 crore for theprevious period) and Rs 68.9 crore for thenine months ended December 2010 (Rs 84.6crore for the previous period) recognised asrevenue of ships under construction on pro-portionate completion basis.� Work on certain pending equipment andfacilities, which were delayed due to vari-ous reasons, have substantially been com-

pleted and the Goliath cranes are in the pro-cess of trial commissioning.� Accounted for contract revenue and expensesfor offshore vessels, based on proportion ofcompletion of contracts certified by technicalexperts. Cost estimated for revenue recognisedrepresented reversal of Rs 19 crore for thequarter (Rs nil for the previous period) andprovision of Rs 39 crore for the nine monthsended December 2010 (Rs nil for the previousperiod), being provision for proportionate costto be incurred to allocate profit on the contractto whole of the contract.Gujarat State Petronet: Changed the de-preciation rate on gas transmission pipelinesfrom 8.33% straightline method to 4.75%straightline method from 1 April 2010, as perthe rates prescribed by the Companies Act,1956. Difference in depreciation due to revi-sion recognised in the P&L account for theDecember 2010 quarter. Accordingly, depre-ciation lower by Rs 75.5 crore for the ninemonths and by Rs 25 crore for the quarter.Veritas (India): Veritas FZE, a subsidiary,acquired an oil tank terminal in the Hamriyahfree zone, Sharjah, UAE, for facilitating stor-age and distribution of chemicals.JSL Stainless: Major capital equipment forthe 0.8-mtpa stainless steel project in Orissaarrived and installed. The project is underadvance stage of implementation.� Entered into long-term arrangement withJSW Steel for usage of coke oven facilityand intends to enhance its capacity fromexisting 0.425 mtpa to 0.85 mtpa.� Exceptional items for the quarter and ninemonths represented fluctuations on foreigncurrency assets and liabilities including loans.� JSL Energy, a newly incorporated com-pany, signed a memorandum of associationwith the Orissa government to set up a

1,320-MW super critical thermal powerproject in Orissa.Jai Balaji Industries: The ductile iron pipeplant at Durgapur, with a capacity of 2.40lakh mtpa, commenced commercial produc-tion from 3 November 2010.Fresenius Kabi Oncology: Received Rs5.79 crore from of disposal of Dabur Pharma(Thailand) Company, a wholly-owned sub-sidiary, as against investment of Rs 3.11crore in equity. The difference of Rs 2.68crore accounted for as ‘Extraordinary in-come’ during the December 2010 quarter.Parsvnath Developers: Parsvnath Promotersand Developers Pvt Ltd became a subsidiary.� Pursuant to the investment agreement en-tered in December 2010 with ParsvnathBuildwell Pvt. Ltd (PBPL) and two over-seas investors managed by Sun-Apollo, aninternational real estate equity fund, trans-ferred and assigned its development rightsof one of its projects to PBPL.Firstsource Solutions: Sold investmentin subsidiary Pipal Research Corporation.The resultant profit of Rs 5.1 crore ac-counted in OI.HT Media: Provision for impairment re-lated to the ‘partnership for growth’ busi-ness considered as part of operating ex-penses from 2010-11. Accordingly, impair-ment provision was Rs nil for the quarterended December 2010, Rs 4.4 crore for thenine months ended December 2010, and Rs4 crore for the nine months ended December2009 and was reclassified from ‘Exceptionalitems’ to ‘Operating expenses’.� Invested in subsidiaries HT Digital Me-dia Holdings (Rs 27.5 crore in compulsorilyconvertible debentures), HT Burda Media(Rs 11.7 crore as advance against allotmentof equity shares) and Firefly e-Ventures (Rs15 crore as inter corporate deposit).� The scheme of arrangement involvingdemerger of the job portal business of Fireflye-Ventures, a subsidiary, and transfer of thebusiness to the company considered in com-puting effective annual tax rate, as per AS-25. After adjusting available tax losses of thedemerged business, tax expense was lowerby Rs 4 crore for the quarter and nine monthsended December 2010, resulting in credit intax expenses for the December 2010 quarter.Indiabulls Financial Services: Sold 26%of its stake in Indian Commodity Exchange(ICEL) to Reliance Exchangenext. As a re-sult, stake in ICEL reduced to 14%.� Premium on redemption (accrued but notdue) of non-convertible debentures of Rs



1260 crore issued in July 2010 and Rs 250crore issued in August 2010, amounting toRs 64.4 crore, adjusted against the securi-ties premium account.Everest Kanto Cylinder: Raised US$ 35million by way issue of FCCBs in 2007-08.These FCCBs, due in 2012, are optionallyconvertible into equity subject to certainconditions, whose impact not determinableat present. The premium payable on exer-cise of redemption option, if any, would beaccounted by way of debit to the securitiespremium account.� Considering the foreign exchange exposureand present volatility in exchange rates,MTM losses on outstanding foreign cur-rency derivatives contracts charged to theP&L account, discontinuing the hedge ac-counting principles followed up to 31 March2010. As a result, exchange loss was higherby Rs 47 lakh for the nine months endedDecember 2010 and gain higher by Rs 55lakh for the quarter ended December 2010.� To consolidate and promote synergyamong similar facilities and effectiveutilisation of manufacturing facilities, theentire activities of the Aurangabad plant tobe shifted to a larger unit located atGandhidham in Gujarat.Consolidated Construction Consortium:Orders on hand stood at Rs 4333.4 crore.Fresh orders received during the third quarteramounted to Rs 311.6 crore. Booked addi-tional Rs 299-crore orders in January 2011.� Two wholly-owned fully operational sub-sidiaries Consolidated Interiors and NobleConsolidated Glazings reported standaloneaggregate cumulative turnover of Rs 84.2crore (Rs 63 crore for the previous period)and profit after tax of Rs 1.9 crore (Rs 1.5crore for the previous period).� CCCL Infrastructure, a subsidiary,awarded a project under the JawaharlalNehru National Solar Mission scheme, forthe development of a 5-MW solar powerplant in the Tutucorin district of Tamil Nadu.Entertainment Network (India): Has amedia collaboration arrangement withBennett, Coleman and Company (BCCL),the ultimate holding company. This arrange-ment seeks to expand the advertisement mar-ket and also helps the company to gain ac-cess to certain clients who may not other-wise advertise on FM radio. Revenue fromthis arrangement were Rs 4.5 crore (Rs 3.4crore for the previous period) and Rs 11.2crore (Rs 10.8 crore, for the previous pe-riod), respectively, during the quarter and the

nine months ended 31 December 2010. Sub-sequently, in view of the uncertainties on tim-ing and quantum of collection, the companyhas, based on the principles of prudence, cre-ated provision for doubtful debts of Rs 3.6crore for the quarter (Rs 3 crore for the previ-ous period) and Rs 8.6 crore for the ninemonths (Rs 9.5 crore for the previous pe-riod) on sales made through this arrangement.GTL Infrastructure: FCCBs aggregating toUS$ 228.3 million, convertible at the optionof the bondholders by 22 November 2012,were outstanding end December 2010. If theFCCBs holders do not exercise their optionby due date, FCCBs are redeemable at a pre-mium of 40.4064% of the principal amount.In such a scenario, the company will be ad-justing the premium to the securities premiumaccount. The pro-rata premium worked outto Rs 259.5 crore on 31 December 2010.Godawari Power & Ispat: Other operatingexpenditure, depreciation and interest costsubstantially increased during the year dueto commencement of production of the ironore pelletisation plant, a backward integra-tion project for the sponge iron plant. Themajor part of the pellet produced captivelyconsumed for manufacturing of sponge iron,resulting in lower cost of raw materials. Pel-let is also sold to other steel plants.� Commercial operation in the 20-MW bio-mass based power plant commenced suc-cessfully on 1 November 2010.� Awarded a 50-MW solar thermal powerproject under the Jawaharlal Nehru NationalSolar Mission. It has decided to set up thisplant through a special purpose vehicle,Godawari Green Energy, a 100% subsidiary.Educomp Solutions: In February 2011, theboard approved a proposed joint venture be-tween Educomp Solutions and Zeebo Inc,

USA, in India to introduce a version of Zeebo’s3G-connected education and entertainmentsystem specifically for the Indian market.Great Offshore: Adopted AS-30 on hedgeaccounting policy. Accordingly, unrealisedexchange gain or loss on revaluation of itsforeign currency borrowings designated inthe hedge reserve account. Net unrealisedexchange gain of Rs 7.4 crore credited to thehedge reserve account. Total realised ex-change loss debited to the P&L accountamounted to Rs 4.4 crore. The credit bal-ance in the hedge reserve account stood atRs 2.9 crore on 31 December 2010.� Accounted interest receivable of Rs 12.6crore from its wholly-owned foreign sub-sidiary, Great Offshore (International), oncost basis. Of this Rs 3.9 crore was for thehalf year ended September 2010.GVK Power & Infrastructure: Transferredbalance of its total investments in GVKGautami Power to its wholly-owned subsid-iary, GVK Energy. With this, completed thecreation of a separate energy vertical.� GVK Jaipur Expressway Pvt Ltd, a wholly-owned subsidiary, amortised toll rights basedon actual traffic. Had it continued to use thestraightline method as followed earlier, chargeto the P&L account, net of tax, would havebeen higher by Rs 1.4 crore.Adhunik Metaliks: As per the order ofHC, net deferred tax liability of Rs 3.2 crorefor the quarter and Rs 10.8 crore for the ninemonth ended December 2010 adjustedagainst the securities premium account.Prime Focus: Not re-valued FCCBs of US$55 million as these are considered non-mon-etary liability. Had the company revaluedthose bonds, considering them as a long-termmonetary liability, profit would have beenlower by Rs 61.5 lakh for the quarter andlower by Rs 2.3 crore for the nine months.The reserves would have been lower by Rs28.8 crore and the foreign currency mon-etary item translation difference accountwould have been Rs 78.9 lakh. Further, hadthe premium on redemption been provided,securities premium would have been lowerby Rs 55.4 crore and the FCCB balancewould have been higher by Rs 84.3 crore on31 December 2010. This is subject matterof qualification in the auditors’ report for2008-09, 2009-10 and also in the limitedreview reports for all the last three quarters.Kingfisher Airlines: Deferred tax assetrecognised on account of unabsorbed depre-ciation and business losses aggregated to Rs334.1 crore for the nine months. The man-



agement believes that there is virtual cer-tainty supported by convincing evidence forrealising this deferred tax.� Adopted the revised exposure draft as perAS-10 on tangible fixed assets, which allowscosts on major repairs and maintenance in-curred to be amortised over the incrementallife of the asset. Extended this treatment tocosts incurred on major repairs and mainte-nance for engines of aircrafts acquired on op-erating lease. Had the company not adoptedthis method of accounting, loss before tax andafter tax would have been higher by Rs 3.6crore and Rs 2.4 crore, respectively, for thequarter and the loss before tax and after taxwould have been lower by Rs 7 crore and Rs4.7 crore, respectively, for the nine months.This revised accounting policy has been con-firmed by an independent expert.� Renegotiated its contract with the Sabregroup on 30 September 2010. Pending quan-tification of the contract, not been given ef-fect to it in this quarter.� Executed a master debt recast agreementwith its consortium bankers. The salient fea-tures include (a) Rs 750.1 crore of loan con-verted into 7.5% compulsorily convertiblepreference shares, (b) Rs 553.1 crore of loanconverted into 8% cumulative redeemablepreference shares redeemable at par after 12years, (c) repayment of balance loans resched-uled with a moratorium on repayment of prin-cipal of two years and step-up repaymentover the subsequent seven years, (d) intereston loans of banks for the period July 2010 toMarch 2011 to be converted into a fundedinterest term loan repayable in five years withtwo-year moratorium, (e) interest rate onloans reduced by over 300 basis points, (f)additional fund-based loan facilities of Rs768.3 crore and non-fund-based facilities ofRs 444.4 crore sanctioned by banks, (g) partof the working capital limit of Rs 297.4 croreconverted into working capital term loans,and (h) loans from promoters of Rs 648 croreconverted into 7.5% compulsorily convert-ible preference shares and terms of 6% re-deemable preference shares of Rs 97 croreissued to promoters have been varied so thatthey became 6% compulsorily convertiblepreference shares.� Loans and inter-corporate deposits fromcertain other lenders aggregating to Rs709.3 crore converted into optionally con-vertible debentures. These lenders haveconfirmed their intention to convert thesedebentures into equity shares and to actin concert with the promoters.

� Incurred substantial losses and net worthhas been eroded. However, considering theimprovement in economic sentiment,rationalisation measures, fleet recovery andimplementation of debt recast package, theinterim financial statements have been pre-pared on the basis of a going-concern.Allcargo Global Logistics: Reassessed es-timated useful life of cranes from 1 January2010. If it had continued with old estimateof useful life, depreciation and profit beforetax would have been Rs 20.4 crore and Rs27.1 crore, respectively, for the quarter andRs 64.8 crore and Rs 120.4 crore, respec-tively, for the year ended December 2010.Hinduja Global Solutions: OI includedgain of Rs 2.5 crore for the quarter (loss Rs2.4 crore for the previous period) on ac-count of fluctuations in foreign exchange.Further, OI included gain of Rs 2.6 crore forthe nine months (loss of Rs 6.5 crore for theprevious period).Network 18 Media & Investments: Audi-tors have qualified their report on excessremuneration paid to the managing director.The Central government has partially ap-proved the remuneration paid and the com-pany has requested for reconsideration ofthe remaining portion.� Auditors have qualified their report onnon-provision, other than temporary dimi-nution in value, of long-term investmentsand advances of Rs 400.6 crore. As per themanagement, in view of long-term involve-ment of the company with the investee com-panies, no provision is required.Indiabulls Real Estate: Disposed of twoof its wholly-owned subsidiaries and soldone wholly-owned subsidiary to another ofits subsidiary. Also invested in two wholly-owned subsidiaries.

Housing Development & Infrastructure:Acquired 69% equity in Lashkaria Construc-tion Pvt Ltd.� On 18 November 2010, the office of thecompany, situated at HDIL Towers, got ex-tensively damaged by fire, which destroyedproperty and records. In the financial re-sults, exceptional items of Rs 4.5 crore netof insurance claims and salvage representedloss by fire.Motilal Oswal Financial Services: OIincluded dividend of Rs 13.4 crore receivedfrom subsidiary Motilal Oswal InvestmentAdvisors Pvt Ltd during the nine monthsended December 2010.Religare Enterprises: Issued 13.66% cu-mulative redeemable preference shares ag-gregating to Rs 120 crore to RHC FinancePvt Ltd. The preference shares are redeem-able at a premium not exceeding Rs 150 pershare at the end of the five years or at anearlier date. Premium payable on redemp-tion will be charged to the securities pre-mium account.� Through Religare Capital Markets, awholly-owned subsidiary, acquired (a) 50%stake in Bartleet Mallory Stock Brokers PvtLtd, an established stock broking entity inSri Lanka, and (b) 100% stake in institu-tional broking entities Barnard Jacobs Mellet(UK) Religare Australia Securities AustraliaPty Ltd, Religare Capital Markets (HongKong), and Religare Capital Markets(Singapore) Pte Ltd.� As per the capital protection clause in theAegon Religare Life Insurance joint venture(JV) agreement, the company’s share of netloss of Rs 32.2 crore for the December 2010quarter and Rs 102.9 crore for 2009-10 shownas recovery of expenses from JV partner andhas no impact on consolidated results.� Made various investments (equity shares,preference shares and debentures) in sub-sidiaries and JVs during the quarter and ninemonths. These included Religare Finvest,Religare Global Asset Management Inc,USA, Religare Housing Development Fi-nance Corporation, Religare Capital Mar-kets International (Mauritius), ReligareHousing Development Financial Corpora-tion, Religare Capital Market, Religare ShareBroker, Religare Bullion, and Religare AssetManagement Company. Investment made injoint ventures included Aegon Religare LifeInsurance Company and Religare MacquarieWealth Management.� Transferred equity shares at book valueof Rs 97.3 crore of Religare Housing Devel-

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One-year average Telefolio return is 58% compared to average BSE Sensex return of 19%

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Engineers India 13-Mar-09 417 2,148 415 95

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Swaraj Engines 06-Mar-09 85 296 248 105

Kalpataru Power Tr. 27-Mar-09 331 1,051 218 70

Scrip Rec. Rec. Cur. Price % SensexDate Price 10-03-10 Var Var(%)

Rural Electr. Corp. 10-Mar-09 79 237 200 110

Supreme Industries 17-Apr-09 162 482 198 55

SEAMEC 15-Apr-09 75 203 171 52

Honeywell Auto India 29-Apr-09 992 2,632 165 50

Axis Bank 09-Apr-09 445 1,130 154 58

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opment Finance Corporation to ReligareFinvest, a wholly-owned subsidiary. Fur-ther, sold equity shares of Religare UnitedSoccer, which ceases to be subsidiary. Soldlong-term investment of 17.41 lakh equityshares in Karnataka Bank, with book valueof Rs 24 crore, at Rs 33.1 crore and realisedlong-term capital profit of Rs 9.1 crore. Ac-quired 70% stake in Northgate Capital LLCand Northgate Capital LP in the US throughReligare Global Asset Management Inc, US,a wholly-owned subsidiary of the Company.Edelweiss Capital: Decided to charge brandusage fees to its subsidiaries beginning from2010-11. Accordingly, income from opera-tions included Rs 27.8 crore for the quarter,comprising Rs 18 5 crore being brand usagefee charged to its subsidiaries for the ninemonths ended December 2010.eClerx Services: Deferred recognition ofcumulative MAT credit of Rs 11.7 crore endDecember 2010, which could be availablefor set-off against future tax liability.OnMobile Global: In October 2010, ac-quired the third-generation video technol-ogy and mobile solutions business from Sili-con Valley based Dilithium Networks Inc.� Sold 8% of its equity holding on a dilutedbasis in Verse Innovation Pvt Ltd for Rs11.1 crore in July 2010.DB Corp: The printing facilities at somelocations in Jharkhand and Jammu & Kash-mir commenced commercial operations dur-ing the nine months ended December 2010.The results include expenses incurred ononetime pre-launch activities.SKS Microfinance: Provisions and write-offs included additional provision of Rs 26.9crore made during the December 2010 quarterfollowing the recommendations made in thereport of the sub-committee of the centralboard of directors of the RBI to study issuesand concerns in the micro finance sector, dated19 January 2011, which requires a microfinancecompany to maintain at all times an aggregateprovision for loan losses higher of (a) 1% ofoutstanding loan portfolio or (b) 50% of ag-gregate loan instalments overdue for more than90 days and less than 180 days and 100% ofthe aggregate loan instalments overdue for 180days or more. As a result, profit before taxlower by Rs 2698.28 lakh for the quarter.Kirloskar Oil Engines: Exceptional itemsrepresented gain of Rs 3.1 crore for the quarterand loss of Rs 13.5 crore for the nine monthsended December 2010 on valuation of out-standing derivative instruments taken to serveas hedge against highly probable forecast trans-

actions, which, on testing, are likely to be inef-fective due to volatility in foreign exchangerates, now recognised in the P&L account.� Adopted AS-11. Rs 8.4 crore, the eligibleexchange difference loss in the December2010 quarter, (Rs 21.4 crore loss for thenine months), adjusted in the cost of assets.IL&FS Transportation Networks: Subsid-iary Badarpur Tollway Operations Manage-ment was incorporated for undertaking op-erations and maintenance activities at theBadarpur-Faridabad toll road.� Invested 50.94% in the equity of MPBorder Checkpost Development Company,which has signed a concession agreement fordevelopment, operation and maintenance of24 border check posts in Madhya Pradesh.� A foreign subsidiary invested 96.4% and50% in the equity of Conservacion SdeInfraestructuras De Mexico SD DE CV andGeotecnia Y Control De Qualitat SA.Jaypee Infratech: The Yamuna express-way project progressing satisfactorily. To-tal expenditure incurred aggregated to Rs 92.3crore up to 31 December 2010 against esti-mated cost of Rs 97.3 crore.� Real Estate sales aggregated to 30.31 lakhsquare feet, with estimated gross sales valueof Rs 9.8 crore, during the quarter.Indiabulls Power: Disinvested 26% of itsstake in one of its wholly-owned subsidiaries.� Invested further Rs 4.9 crore in one of itswholly-owned subsidiaries.DB Realty: Revised estimated constructioncost for two of its projects. Due to revision,profit of Rs 51.3 crore and Rs 47.1 crore,respectively, so recognised up to 30 Sep-tember 2010 and 31 March 2010 adjusted,resulting in reduction in profit for the quar-ter and nine months ended December 2010.� Invested in equity shares of DB SpaceconPvt Ltd (100% equity) and Vanita Infrastruc-

ture Pvt Ltd (100% equity).� Made additional investment in one of itsjoint ventures, M K Malls and DevelopersPvt Ltd, by buying 4.57% of equity shares;8.70% cumulative convertible preferenceshares and 30.21% redeemable optionallyconvertible cumulative preference sharesduring the December 2010 quarter.Jet Airways: Has equity and preference in-vestments aggregating to Rs 1645 crore in JetLite (India) a wholly-owned subsidiary, andadvanced interest-free loan of Rs 1464.8 crore.A reputed valuer valued the equity interest inthe subsidiary as on 31 March 2010 based onits business plans, which supports carryingvalue of such investment. Continues to pro-vide financial support to the subsidiary tofurther its business plans and expects it toturn around. Accordingly, the subsidiary’s fi-nancial statements have been prepared on agoing-concern basis and no provision consid-ered necessary at this stage.� Other operating income included incomefrom leasing of aircraft. Income from suchactivity stood at Rs 140 crore (Rs 106.4crore for the previous period) and Rs 380crore (Rs 594.3 crore for the previous pe-riod), respectively, for the quarter and ninemonths ended December 2010.� Depreciation on simulators provided onwrittendown value method up to 31 March2010. Shifted to straightline method from 1April 2010. Surplus arising from retrospec-tive computation aggregating to Rs 53.9 croreaccounted for and disclosed as ‘Exceptionalitem’. Consequently, depreciation was lowerby Rs 1.6 crore and Rs 4.8 crore, respec-tively, for the quarter and nine months.� Acquired 100% shares of Sahara Airlines,now known as Jet Lite (India), in April 2007.As per the agreement and consent terms,sale consideration is to be paid in instalmentsby 30 March 2011. However, as a result ofcertain disputes that arose between the par-ties, both parties have filed petitions in HCfor breach of agreement and consent terms.The matter is pending and the managementis confident that the outcome will not mate-rially impact the financials and, therefore,no provision made.� Interest and finance charges included in-flow and or outflow on closure of derivativedeals. Net outflow from closure stood at Rsnil and Rs 43.7 crore, respectively, for thequarter and nine months. The correspond-ing outflow stood at Rs nil for the quarterand nine months ended December 2009.

— Sachin Khedekar

ApnaMoney Tax matters

86 May 02 – 15, 2011 CAPITAL MARKET

Tax Matters

Are bonus debentures andpreference shares tax-neutral?By T K Doctor & Zankhna P Mehta

Some public limited companies in the pasthave given bonus debentures while someothers issued bonus redeemable prefer-ence shares. Please explain the intricacies.

— Shankta Prasad, e-mail

A fixed amount of dividend is paid on pref-erence shares every year before dividend isannounced on ordinary equity shares. As aresult, investors holding preference sharesare confident about getting dividend. As theinstrument is redeemable there is also re-turn of the principle amount for the share-holder after a prefixed number of years.Preference bonus shares do not qualify asnormal dividend or as deemed dividend.Thus, the issue is tax-neutral but the tax in-cidence would shift to the redemption date.In addition, the fixed rate of dividend re-ceived every year on preference shares isconsidered as normal dividend income.

Bonus debentures are received free ofcost because of the equity holding in thecompany. This receipt is deemed dividendand taxable in the hands of the receiver.Thus, there will be an element of incomeand tax when bonus debentures are issued.When the debentures are redeemed at facevalue on their maturity, there will not be anygain or loss for the investor. The interest that

will arise on the debenture will be taxablein the hands of the investor as income fromother sources.As per Section 54 and Section 54F of theIncome Tax (IT) Act, 1961, new propertyacquired cannot be disposed of within oneyear or two years or three years to claimexemption from capital gain? The lan-guage is confusing. Hence, can you clarify?

— Purandar M, e-mail

Section 54 of the IT Act provides exemp-tion to capital gain arising from the transferof a long-term residential house property ifthe amount of capital gain so arisen is rein-vested in another residential house property.Section 54F provides exemption to capitalgain arising from transfer of any long-termcapital asset other than a residential houseproperty if the net consideration (sales valueless expenses) is invested in a residentialhouse property. Section 54F is applicable if

the assessee is not an owner of more thanone residential house other than the newhouse acquired or constructed on the datewhen he earns long-term capital gain. Sec-tion 54 has no such stipulation.

Exemption is available on purchase ofnew property made within one year beforeor within two years after the sale of the origi-nal asset. But if the property is under con-struction, the construction should be com-pleted within three years after the date ofsale of original asset. Exemption is not avail-able if the construction is completed evenby a day before the sale of the original as-set. There is no time limit for commence-ment of construction. This essentially meansthat all the cost incurred on the construc-tion even before the transfer of capital assetcan be claimed as acquisition cost.

If exemption is availed under Section54, the assessee cannot sell the newly-ac-quired property within three years from thedate of its purchase or construction. If soldwithin three years, the cost of the new assetwill be reduced by the amount of long-termcapital gain (LTCG) claimed as exempt un-der Section 54 and the difference betweenits sale price and such reduced cost will bechargeable as short-term capital gain for theyear in which the new asset is sold.

If exemption under Section 54F isavailed, the assessee cannot sell the newproperty within three years. Also, he shouldnot purchase within two years or constructwithin three years another residential house.If either of the aforesaid conditions is notsatisfied, then capital gain claimed as ex-empt under Section 54F shall be deemed tobe LTCG of the previous year in which suchnew asset is transferred or another house ispurchased or constructed.We see lot of advertisements about banksand non-banking finance companies(NBFC) saying that their gross and net non-performing assets (NPA) have gone down.Does it mean that they will get the full write-off in their income tax assessments?

— Loukesh Varia, e-mail

Under Section 36(1)(viia) of the Income Tax

Bonus preference shares are tax-neutral but would betaxed on redemption. Bonus debentures are deemed asdividend and taxable in the hands of the receiver

ApnaMoney

ApnaMoney Tax matters

87May 02 – 15, 2011 CAPITAL MARKET

(IT) Act, 1961, banks are allowed deduc-tion for provision of NPAs up to specifiedlimit, i.e., 7.5% of gross total income. Gen-erally, the amount of NPA provision made,as per the Reserve Bank of India (RBI)norms, is much more than the deduction al-lowable under Section 36(1) (viia) of the ITAct. As a result, a major part of the NPAprovision gets disallowed. However, NPAprovisions made by NBFCs, as per by theRBI norms, are disallowed by tax authori-ties when assessing their income tax liabili-ties although these are business expenses.

Banks enjoy tax benefit on NPA, as perthe RBI norms. But NBFCs, which are alsorequired to follow these prudential normsfor NPAs, as per RBI directives, are deniedthis tax benefit under Section 36(1)(viia).Is interest paid by partnership firm on loantaken from a co-operative credit society li-able for tax deduction at source (TDS)? Ifthe credit society invites deposits from andgives gross loans to its members, will it beconfined in the definition of ‘Co-operativecredit society doing banking business’?

— Rajan Anandpara, e-mail

Section 80P (2)(a)(i) of the Income Tax (IT)Act, 1961, refers to co-operative societyengaged in the banking business, which, inturn, refers to co-operative society provid-ing credit facilities to its members. The ex-pression providing credit facilities coversthe business of lending money on interest(i.e., loans) (refer Commissioner of IncomeTax v Uttar Pradesh Co-operative CaneUnion Federation and Rodier Mill Employ-ees Co-Operating Stores). If your society isgiving loans to its members, then it will besaid to be engaged in the banking business.According to Section 194A of the IT Act,any person excluding individual or Hinduundivided family responsible for paying toa resident any income by way of interestother than income chargeable as interest onsecurities is required to deduct tax at sourcewhole crediting such income to the accountof payee or at the time of payment by anymode, whichever is earlier.

When interest is credited or paid to anybanking company, co-operative bank, publicfinancial institutions, Life Insurance Corpo-ration, Unit Trust of India, an insurance com-pany or a co-operative society carrying onthe business of insurance, or notified institu-tion, then TDS under Section 194A is notapplicable. Societies registered under theSocieties Registration Act, 1860, financed

Deductions under Section 10A or 10AA or 10B or 10BA orunder provisions of Chapter VIA of the IT Act will not beallowed if the assessee fails to claim them in his IT return

The replies are only in the nature of guidelines. The taxcounsellorsand the publication are not responsible forany decision taken by readers on the basis of the same.Readers may address their queries on direct taxation to:T K Doctor, C/o Capital Market,101, Swastik Chambers, Sion-Trombay Road,Chembur, Mumbai-400 071.E-mail: [email protected]

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wholly by government, are notified.As co-operative credit society is not

covered, the partnership is liable to deductTDS on payment of interest on loan takenfrom co-operative credit society. Under theDirect Taxes Code, there is a specific pro-vision for tax to be deducted at source. Ifthe payment after deduction of TDS is notaccepted by the co-operative credit society,then the deductor can demand the circularor declaration from the deductee underwhich the deductee is excluded from thescope of Section 194A.I had filed my income tax return for as-sessment year 2008-09 (financial year2007-08) on 1 June 2008. But on accountof my ignorance and hurry to file returnquickly to get refund at the earliest, Ifailed to claim the benefit for certain do-nations made and tuition fees paid for mychildren. Instead of refund, I have beenasked to pay some tax, as per the scru-tiny order. On showing the assessment toa competent chartered accountant, hedrew my attention to the above lapse onmy part, i.e., not claiming proper deduc-tions. Is it not the duty of income tax of-ficer (ITO) to guide an ignorant tax payerbefore finalising the order?

— Padmanabh Bisnoi, e-mail

As per circular no 14, dated 11 April 1955,issued by the Central Board of Direct Taxes,it was clarified that ITOs must not take ad-vantage of the ignorance of assessees to theirrights. It is their duty to assist taxpayers forclaiming and securing relief. ITOs shouldtake the initiative when it comes to theirnotice that some refund or relief is due tothe assessees. Yet, in many cases, some ITOsdo not allow such deductions to theassessees. As a result, when such a casecomes to the notice of the taxpayer, he hasto go in for litigation.

In 2009, Section 80A(5) of the IncomeTax (IT) Act, 1961, was introduced withretrospective effect from 1 April 2003 toprovide that deductions under Section 10Aor 10AA or 10B or 10BA or under provi-sions of Chapter VIA of the IT Act will not

be allowed if the assessee fails to claim themin his income tax return.I am from Gujarat and invest in the stockmarket. Along with long-term investment,I also do intra-day as well as derivatives(futures and options, or F&O, trading). Iwant to know whether I need to audit mybooks of account. What is the limit fortransactions in short-term, F&O and de-livery-based trading to require an audit?I am employed in a textile mill.

— Jack Robission, e-mail

According to Section 44AB tax of IncomeTax (IT) Act, 1961, audit is applicable if to-tal sales turnover or gross receipt from busi-ness for the previous year(s) relevant to theassessment year exceeds Rs 60 lakh fromassessment year (AY) 2011-12 (financialyear 2010-11). Or if the gross receipt fromthe profession of the person for the previ-ous year(s) relevant to the AY exceeds Rs15 lakh from AY 2011-12.

For delivery-based transactions, thelimit of turnover is arrived on the basis ofsales proceeds/value. For F&O and non-delivery-based transactions, the limit ofturnover is arrived at on the basis of aggre-gate of all positive and negative differences.For example:

Case A Case B

Sales proceeds 100 100

Cost 10 110

Profit/(Loss) 90 (10)

For delivery-based transactions, thesales turnover is Rs 200 in the example (Rs100+Rs 100). For non-delivery based trans-action, F&O turnover is Rs 90+Rs 10 = Rs100. Negative sign is ignored. To determinethe limit of Rs 60 lakh, the aggregate turn-over of both your business will be consid-ered (i.e., textile and share trading).


KSB Pumps

Will be back on growth trackSet to reap benefits of healthy order book, capacity expansionand strong technology support from parentKSB Pumps is the Indian associate of KleinSchanzlin & Becker (KSB), Germany. Theforeign promoter holds 40.54% stake andthe Indian promoters 25.95%, taking thetotal promoter holding to 66.49%.

The parent has 19 manufacturing loca-tions and 51 operating companies world-wide, with sales in more than 100 countries.The group reported sales of about 1.9 bil-lion euro and profit of about 90 million euroin 2010. Its order book is up 7% to about 2billion euro from a year ago. Through itsdistribution network, the group supplies itsproducts to building services, original equip-ment manufacturers, the energy and miningindustries in the public sector, power plants,and process engineering players.

KSB's products are also used in thechemical, petrochemical and other indus-tries to transport aggressive, corrosive, ex-plosive, solid-laden and viscous liquids, andindustrial and municipal waste water, andin heating and air-conditioning Thecompany’s high-value valves, especiallycontrol valves, are used in the power andother engineering sectors.

With a significant presence in the Asianmarket, KSB is showing an order bookgrowth of nearly 33% over the year.Though the markets in the EU and UShave stopped falling, they are still togrow. To cater to the demand in theseregions, the group has earmarked a capexof about Rs 80-Rs100 crore, which willdouble its capacity in pumps and addsome additional line of manufacturing inthe valves division. The brownfield capexwill be funded through internal accruals.This is for the first time after many yearsthat the company is incurring such a sig-nificant capex.

KSB Pumps manufactures pumpsused in up to 650-MW power plants. Thiscapacity takes care of all the subcriticalorders of the power sector. The pumpproject orders for super critical technol-ogy and for ultra mega power projects arebid for by the parent. It has won con-tracts from Tata Power and Reliance In-frastructure. The Indian company earns

CapitalineCorner

agency commission from the parent for lo-cal services. Going forward, the parent willtransfer the entire technology for manufac-turing the super critical pumps to the Indian

http:/ /www.telefol io.com

FOR MORE DETAILS FLIP TO PAGE 82

Capita Telefoliobeats

BSE Sensexby almost 200%

company and will use it as a manufacturingbase once the planned capex is over.

Associate company MIL Controls, inwhich KSB Pumps India has 49% stake,manufactures robotic valves. This is a nichetechnology-intensive business catering par-ticularly to gas production, upstream, mid-stream and downstream activities, and allindustries where human intervention is notpossible. The company has consistentlyreported profit and, more importantly, itcontinued to grow even when there wasgeneral downturn in the industry. It re-ported PBT of Rs 27.91 crore in calendaryear (CY) 2010 as against PBT of Rs 20.9crore in CY 2009.

KSB Pumps reported net sales growthof 8% to Rs 615.10 crore, while OP wasdown 27% to Rs 83.65 crore in CY 2010.PAT was lower by 22% to Rs 51.57 crore.After adding the share of profit of Rs 9.04crore of MIL Controls, consolidatedPAT was down 18% to Rs 58.39 crore overCY 2009.

After the global financial turmoil and itsadverse effects, KSB Pumps India had tobag orders at low prices to survive duringthe slowdown. Most of these low-margin

orders were executed in CY 2010. Hence,margin crashed to 13.6% in CY 2010 fromover 20% in CY 2009. In fact, this wasthe lowest margin the company had re-ported for the past many years. With theIndian economy getting back on track andorders flowing smoothly, it was able tograb many pump project orders at bettermargin in CY 2010. Execution will takeplace from CY 2011.

We expect KSB Pumps to registerstandalone net sales and PAT of Rs738.12 crore and Rs 69.27 crore, respec-tively, in CY 2011. This gives EPS ofRs 19.9. We expect consolidated EPS ofRs 22. At the current market price ofRs 278, the scrip is available at 14 timesits standalone CY 2011 earning and at12.6 times its consolidated CY 2011earning. This P/E ratio is low for anMNC associate set for growth and ca-pacity expansion. �

KSB Pumps : Financials

0812(12) 0912(12) 1012 (12) 1112(12P)

Sales 601.00 567.56 615.10 738.12OPM% 18.0 20.3 13.6 15.5OP 108.41 115.19 83.65 114.41Other inc. 5.50 7.75 11.87 12.55PBIDT 113.91 122.94 95.52 126.96Interest 2.25 1.82 0.53 0.55PBDT 111.66 121.12 94.99 126.41Dep. 13.02 20.34 20.74 23.02PBT 98.64 100.78 74.25 103.39EO 0.00 0.00 0.00 0.00PBT after EO 98.64 100.78 74.25 103.39Tax 33.91 34.60 22.68 34.12PAT 64.73 66.18 51.57 69.27EPS (Rs)* 18.6 19.0 14.8 19.9EPS (Rs)** 20.6 20.4 16.8 22.0

*Standalone EPS on current equity of Rs 34.81 crore of face valueof Rs 10 each. **Consolidated EPS. EO: Extraordinary items.Figures in Rs crore. (P): Projections. Source: Capitaline Databases

Expanding capacity

KSB Pumps has earmarked a capex ofabout Rs 80-Rs 100 crore, which willdouble its pump capacity and boostvalve manufacturing

Delisting Companies

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