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NOTES TO ACCOUNTS

GE Power India Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 4659.54 Cr. P/BV 5.28 Book Value (₹) 131.18
52 Week High/Low (₹) 938/670 FV/ML 10/1 P/E(X) 61.80
Bookclosure 23/07/2019 EPS (₹) 11.22 Div Yield (%) 0.87
Year End :2019-03 

1. GENERAL INFORMATION

GE Power India Limited ( name changed with effect from 5 August 2016, formerly known as ALSTOM India Limited) (‘the Company’) is a publicly owned Company, incorporated on 2 September 1992 as Asea Brown Boveri Management Limited, under the provisions of Indian Companies Act. The equity shares of the Company are listed on the BSE Limited and National Stock Exchange of India Limited.

Its operations includes a composite range of activities viz. engineering, procurement, manufacturing, construction and servicing etc. of power plants and power equipment.

*On 23 May 1997 Haryana Power Generation Corporation (HPGC) executed contracts with Alstom Germany and Alstom India (then ABB entities, predecessor in interest of the Alstom entities mentioned). On 17 April 2000 Alstom terminated the contracts due to breach by HPGC for non-payment of milestone payments due. In May 2001 HPGC encashed the bank guarantees of the two Alstom entities. Alstom then invoked arbitration. Arbitration proceedings lasted 9 years and the tribunal issued a reasoned unanimous award in May 2010. HPGC then filed objections to the award in the district court of Panchkula and High Court of Chandigarh. Alstom won in all forums. Thereafter HPGC moved a special leave petition in the Supreme Court which is currently pending. Alstom / GE argued for and the Supreme court passed an order granting leave and issued an interim stay on the operation of the award, subject to payment of RS. 1,000 million (against bank guarantee).

The amount of RS. 1,000 million alongwith interest thereon amounting to RS. 186.1 million (previous year RS. 104.9 million) (belonging to the two Alstom / GE entities) is thus held in trust pending final order and presented as “other current financial liabilities” refer note 23. Accrued interest of Rs. 14.8 million (previous year Rs. 94.4 million) out of Rs. 186.1 million (previous year Rs. 104.9 million) is classified as “other current financial assets”.

Deposit of H 0.2 million (previous year : H. 0.2 million) pledged with bank against bank guarantee.

For reimbursable expenses and interest accrued on inter corporate deposits from related parties refer note 37.

The Company’s exposure to credit risk related to financial assets carried at amortised cost are disclosed in note 44.

*On account of transition to Ind AS 115 “Revenue from Contracts with Customers” effective from 1 April 2018, unbilled revenues where the contractual right to consideration is dependent on completion of contractual milestone are classified as “other current assets”.

a. Terms / rights attached to equity shares

The Company has only one class of equity shares having a par value of RS. 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends, if any, in Indian rupees. The dividend proposed by the Board of Directors, if any, is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

In the event of liquidation of Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

GE Energy Europe BV (GEEE BV.) on 2 May 2017, sold its entire shareholding (13,789 shares) in the Company to Alstom India Tracking BV. On account of this transaction, GEEE BV is no longer shown as a promoter in any disclosures made by the Company in accordance with applicable laws in India and in the shareholding pattern of the Company.

General Electric Company, United States is the ultimate holding company.

Information about Other provisions and significant estimates

Warranty- Warranty costs are estimated on the basis of contractual agreement, technical evaluation and past experience. The timing of outflows is expected to be as per warranty periods as specified in various contracts.

Contingencies/ others - Provision for contingencies represents estimates made mainly for probable claims arising out of litigations / disputes pending with various authorities.

In accordance with Ind AS 18 on “Revenue” and Schedule III to the Companies Act, 2013, revenue for the previous year ended 31 March 2018 has been reported gross of Excise duty and net of Value Added Tax (VAT)/ Sales Tax. Excise duty was reported as a separate expense line item in the previous year. Consequent to the introduction of Goods and Services Tax (GST) with effect from July 2017, VAT/Sales Tax, Excise duty etc. have been subsumed into GST and accordingly the same is not recognised as part of sales as per the requirements of Ind AS 18.

Disclosure given pursuant to first-time adoption of Ind AS 115:

Revenue recognised during the current year from performance obligation satisfied in the previous periods Rs. 2,330.4 million (net). Remaining performance obligation

As of 31 March 2019, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was Rs.76,570 million. The Company expects to recognize revenue upon satisfaction of remaining performance obligations of 75% within 3 years and the remaining thereafter.

2. GRATUITY AND OTHER POST-EMPLOYMENT BENEFIT PLANS

I) Gratuity

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The plan is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarise the components of net employee benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet for the respective plans.

a) Amount recognised in balance sheet

b) Movement in benefit obligations

c) Movement in plan assets

d) Expenses recognised in the statement of profit and loss

e) Expenses recognised in other comprehensive income

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

f) Actuarial assumptions for gratuity:

Future mortality rate is based on published rates under the Indian Assured Lives Mortality (2006-08) Ult table.

*The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The expected contribution payable to the plan next year is RS. 80.0 million (31 March 2018 : RS. 80.0.million).

Projected plan cash flow

The table below shows the expected cash flow profile of the benefits to be paid to the current membership of the plan based on past service of the employees as at the valuation date :

The weighted average duration to the payment of these cash flow is 6.66 years (previous year 6.98 years). g) Sensitivity analysis

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the impact in percentage terms on the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points.

These sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date. There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analyses.

Information relating to sensitivity analysis for actuarial assumptions, other than disclosed above, including the methods and assumptions used in preparing the analysis, as required by paras 145 (a) and 145(b) respectively, of the Indian Accounting Standard - 19 ‘Employee Benefits’ is not available with the Company.

II) Provident fund

In respect of certain eligible employees, the Company has a provident fund plan which is administered through a trust. The Trust deed provides for the Company to make good any deficiency in the interest to be paid by the Trust to it’s members and the income earned by it. Accordingly the plan is as a defined benefit plan. The Company has obtained an actuarial valuation of the Provident fund liability as at the Balance Sheet date and accordingly the Company has recognised a provision of H Nil million (previous year HNil million) towards provident fund liability.

Following tables summarise the components of net employee benefit expense recognised in the statement of profit and loss and the funded status and amounts recognised in the balance sheet, the total provident fund liability as per the Trust’s accounts and plan assets held by it are given below:

a) Amount recognised in balance sheet

b) Movement in benefit obligations

c) Movement in plan assets

d) Expenses recognised in the statement of profit and loss

e) Expenses recognised in other comprehensive income

f) The expected contribution payable to the plan next year is Rs. 113.2 million (31 March 2018 : 115.9 million). The weighted average duration to the payment is 7.48 years (31 March 2018 : 8.04 years).

g) Disaggregation of plan assets

Information relating to sensitivity analysis for actuarial assumptions including the methods and assumptions used in preparing the analysis, as required by paras 145 (a) and 145(b) respectively, of the Indian Accounting Standard - 19 ‘Employee Benefits’ is not available with the Company.

III) Defined contribution plan

In respect of defined contribution plan, the Company has recognized the following amounts in the Statement of Profit and Loss:

3. LEASE COMMITMENTS

Operating leases

The Company’s significant non cancellable operating lease arrangements are in respect of office premises and vehicles. The lease term for these leases includes a lock-in period and in certain cases are renewable by mutual consent on mutually agreeable terms. Lease payments under operating leases are recognised in the statement of profit and loss.

With respect to all operating leases, lease payments of RS. 297.5 million (previous year RS. 271.1 million) have been recognised as an expense in the statement of profit and loss.

There is no contingent rent in the lease agreements. The lease term is for 1-9 years and is renewable at the mutual agreement of both the parties. There are no restrictions imposed by lease arrangements. There are no subleases.

4. SEGMENT INFORMATION

An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the other components, and for which discrete financial information is available. The Company has considered one business segment i.e. Power as the primary reporting segment on the basis that the risk and returns of the Company is primarily determined by the nature of products and services.

Chief Operating Decision maker of Company is the Managing Director, along with the Board of Directors, who review the periodic results of the Company.

*Project items include equipment and miscellaneous items meant for execution of projects. Segment reporting - Geographical Information

The analysis of geographical information is based on the geographical location of the customers. Segment Information for the year ended :

Major customer :

One customer accounts for 20% approximately (previous year 14% approximately) of Company’s total revenue from operation.

5. RELATED PARTY

List of related parties

Parties with whom control exists:

General Electric Company, United States (Ultimate Holding Company)

Alstom India Tracking BV (Immediate Holding Company) (Formerly Alstom Finance BV)

Parties controlled by the Company (Subsidiary)

GE Power Boilers Services Limited, India Key managerial personnel (KMP)

Mr. Vishal Keerti Wanchoo - Chairman & Non-Executive Director (w.e.f 30 May 2017)

Mr. Prashant Chiranjive Jain - Managing Director (w.e.f.17 April 2019)

Mr. Andrew H DeLeone - Managing Director (for the period from 1 August 2017 to 5 April 2019)

Mr. Sanjeev Agarwal - Whole-time Director (w.e.f. 30 May 2017)

Mr. Arun Kannan Thiagarajan - Non-Executive & Independent Director

Ms. Neera Saggi - Non-Executive & Independent Director

Dr. Uddesh Kumar Kohli - Non-Executive & Independent Director

Other related parties with whom transactions have taken place during the year (fellow subsidiaries/associates)

ACC - Babcock Staff Provident Fund ALSTOM (Thailand) Ltd ALSTOM Israel Ltd ALSTOM Limited ALSTOM Management SA ALSTOM Mexicana S.A. de C.V.

ALSTOM Power Canada Inc.

ALSTOM Power Conversion ALSTOM Power Italia S.p.A.

ALSTOM Power Service ALSTOM Power Service (Pty) Ltd ALSTOM Power Systems Alstom Power, S.A.U.

ALSTOM S&E Africa Proprietary Limited ALSTOM Saudi Arabia Transport and Power Ltd ALSTOM Thermal Maroc Bently Nevada, LLC

BHEL-GE Gas Turbine Services Private Limited FieldCore Service Solutions International India Private Limited FieldCore Service Solutions International LLC GE (Shanghai) Power Technology Co., Ltd.

GE Boiler Deutschland GmbH

GE Drives & Controls, Inc.

GE Energias Renovaveis Ltda.

GE Energy Control Solutions, LLC GE Energy Products France SNC GE Enerji Endustri Ticaret ve Servis Anonim Sirketi GE Gas Turbines (Greenville) L.L.C.

GE Global Parts & Products GmbH GE Grid Solutions, LLC GE Hungary Kft GE Hydro China Co., Ltd.

GE Hydro France

GE hydro France India Project Office GE India Industrial Pvt Ltd GE India Technology Centre Private Limited GE Inspection and Repair Services Limited GE Intelligent Platforms Asia Pacific Pte. Ltd.

GE Intelligent Platforms Private Limited

GE International Operations (NIG) Limited

GE IS&T SAS

GE Middle East FZE

GE Oil & Gas India Private Limited

GE Power Australia Pty Ltd

GE Power Conversion India Private Limited

GE Power Estonia AS

GE Power GmbH

GE Power Infrastructure Romania S.R.L.

GE Power New Zealand Limited GE Power Service (Hong Kong) Limited GE Power Service Korea Ltd.

GE Power Services (India) Private Limited GE Power Services (Malaysia) Sdn. Bhd.

GE Power Solutions (Malaysia) Sdn. Bhd.

GE Power Solutions Japan K.K.

GE Power Sp.z.o.o.

GE Power Sweden AB

GE Power Systems India Private Limited

GE Power Systems Korea Co., Ltd.

GE Power Systems Services Inc. - Saudi Arabia GE Power Taiwan Ltd.

GE Power Vietnam Company Limited GE Renewable (Switzerland) GmbH GE Renewable Austria GmbH

GE Renewable Energy Canada Inc.

GE Renewable Enerji Anonim §irketi GE Renewable Hydro Spain, S.L.

GE Renewable Malaysia Sdn. Bhd.

GE Renewable Management GE Renewable R&D India Private Limited GE Renewable Sweden AB GE Renewable Technologies GE Solutions W.L.L.

GE Steam Power, Inc.

GE Strongwish Automation & Controls Technology Development (Shenzhen) Co. Ltd.

GE T&D India Limited

GE WIND France SAS

General Electric (Switzerland) GmbH

General Electric Energy UK Limited

General Electric Global Services GmbH

General Electric Global Services GmbH - Dubai

General Electric Global Services GmbH - Egypt

General Electric Global Services GmbH - Korea

General Electric International Operations Company, Inc

General Electric International, Inc.

General Electric International, Inc. - Branch - EG General Electric International, Inc. - Branch - IN General Electric International, Inc. - Branch - KU General Electric International, Inc. - Branch - SA General Electric Manufacturing Company - (GEMAC) - LTD.

General Electric Power Services Romania S.A.

General Electric Technology GmbH Grid Equipments Private Limited Grid Solutions SAS GE Energy Services (UK) Limited Intelligent Platforms, LLC Nuovo Pignone S.r.l.

P.T. GE Nusantara Turbine Services PT General Electric Power Solutions Indonesia Wipro GE Healthcare Private Limited Wuhan Boiler Company Ltd Wurldtech Security Technologies, Ltd.

Joint venture under the common control of the Ultimate Holding Company

NTPC GE Power Services Private Limited

6. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, a company needs to spend at least two per cent of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. A ‘Corporate Social Responsibility’ (CSR) Committee has been formed by the company as per the act. The CSR Committee and Board had approved the projects with specific outlay on the activities as specified in Schedule VII of the Act, in pursuance of the CSR Policy.

a) Gross amount required to be spent by the Company during the year is H Nil (previous year RS. 10.2 million)

b) Amount spent during the year on :

7. CAPITAL AND OTHER COMMITMENTS

7.1 Estimated amount of contracts remaining to be executed on capital account and not provided for net of advances RS. 19.9 million (31 March 2018 : RS. 32.7 million)

7.2 For commitments relating to lease arrangements, refer note 35 above and for other comittments refer note 2.14.

7.3 The Company has working capital facilities from:

a) Canara bank which is secured by first charge on pari passu basis by way of hypothecation of stocks and receivables of the Company on first pari passu basis with other banks under multiple banking arrangement. Available limit is H Nil (31 March 2018 : RS. 150 million).

b) ICICI bank which are secured by first charge on pari passu basis on the entire stocks and such other movables including book debts, bills, whether documentary or clean, both present and future. Available limit is RS. 100 million (31 March 2018 : RS. 100 million).

8. CONTINGENT LIABILITIES

Based on the favorable decision in similar cases / legal opinions taken by the Company / discussions with the solicitors etc., the Company believes that it has good cases in respect of all the items listed under (a) and (b) above and hence no provision is considered necessary.

On 28 February 2019, a judgment of the Supreme Court of India interpreting certain statutory defined contribution obligations of employees and employers (the “India Defined Contribution Obligation”) altered historical understandings of such obligations, extending them to cover additional portions of the employee’s income to measure obligations under employees Provident Fund Act, 1952. There is significant uncertainty as to how the liability should be calculated as it is impacted by multiple variables, including the period of assessment, the application with respect to certain current and former employees and whether interest and penalties may be assessed. Since the ruling, a variety of trade associations and industry groups have advocated to the Indian government, highlighting the harm to various industries/ sectors and job growth in India that would result from a retrospective application of the ruling. The Company anticipate the Indian government will review the matter and believe there is a substantial question as to whether the Indian government will apply the Supreme Court’s ruling on a retrsopective basis. As such, the Company has been legally advised not to consider that there are any probable obligations for periods prior to date of aforesaid judgment. The Company is further evaluating its next course of action in this matter.

The Company does not expect any reimbursements in respect of the above contingent liabilities.

9. DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES

The Company has certain dues to suppliers registered under Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED Act’). The disclosures pursuant to the said MSMED Act are as follows:

10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - ACCOUNTING CLASSIFICATION

A. Accounting classifications and fair values

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair value :

1 Fair valuation of financial assets and liabilities with short term maturities is considered as approximate to respective carrying amount due to the short term maturities of these instruments.

2 Fair value of non-current financial assets which includes security deposit has not been disclosed as there is no significant differences between carrying value and fair value.

The following tables shows the carrying amounts and fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy.

For fair value hierarchy refer note 2.1.5.

Significant estimates

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

11. FINANCIAL RISK MANAGEMENT

Financial risk relates to Company’s ability to meet financial obligations and mitigate exposure to broad market risks, including volatility in foreign currency exchange rates and interest rates and commodity prices; credit risk; and liquidity risk, including risk related to our credit ratings and our availability and cost of funding. Credit risk is the risk of financial loss arising from a customer or counterparty failure to meet its contractual obligations. The Company faces credit risk in our industrial businesses, as well as in derivative financial instruments activities. Liquidity risk refers to the potential inability to meet contractual or contingent financial obligations (whether on- or off-balance sheet) as they arise, and could potentially impact Company financial condition or overall safety and soundness.

(A) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the receivables from customers; loans and deposits.

The carrying amounts of financial assets represent the maximum credit risk exposure.

(i) Credit risk management

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which customers operate.

The Company also regularly assesses customer credit risk inherent in the carrying amounts of receivables and contract costs and estimated earnings, including the risk that contractual penalties may not be sufficient to offset our accumulated investment in the event of customer termination. The Company also gains insight into future utilization and cost trends, as well as credit risk, through our knowledge of the installed base of equipment and the close interaction with our customers that comes with supplying critical services and parts over extended periods.

(ii) Provision for expected credit losses

The Company evaluates credit risk based on a variety of data that is determined to be predictive of the risk of loss (including but not limited to external ratings, audited financial statements and cash flow projections and available press information about customers) and applying experienced credit judgement.

(a) Expected credit loss on financial assets other than trade receivables :

With regards to all financial assets with contractual cash flows other than trade receivable, management believes these to be high quality assets with negligible credit risk. The management believes that the parties from which these financial assets are recoverable, have strong capacity to meet the obligations and where the risk of default is negligible or nil and accordingly no provision for expected credit loss has been provided on these financial assets. Break up of financial assets other than trade receivables have been disclosed on balance sheet.

(b) Expected credit loss for trade receivables under simplified approach

Based on internal assessment which is driven by the historical experience/ current facts available in relation to default and delays in collection thereof, the expected credit loss for trade receivables is estimated to be in the range of 1%-2%.

The amount of total allowance for credit loss is disclosed in Note 13 and the movement thereof during the years ended 31 March 2019 and 31 March 2018 is tabulated below:

(B) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company also monitors the level of expected cash inflows on trade receivables and loans (comprising the undrawn borrowing facilities) together with expected cash outflows on trade payables and other financial liabilities.

(i) Financing arrangements

The Company had access to the following undrawn borrowing facilities as at the end of the reporting period:

(ii) Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include contractual interest payments and exclude the impact of netting agreements.

(C) Market risk

Market risk is the risk of loss of future earnings, fair value or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments and deposits, foreign currency receivables, payables and loans and borrowings.

(i) Foreign currency risk

The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the USD and Euro. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company’s functional currency (INR). The risk is measured through a forecast of highly probable foreign currency cash flows.

The Company uses the Fx forward instruments to hedge foreign exchange exposures.

Project exposures are hedged to a minimum of 75% once they are contractually binding, and hedges should match the associated cash flows and the contractually stipulated maturities of the project.

The Company designate entire forward contract at forward rate as the hedging instrument. Changes in the full fair value of the forward contract are accounted for through statement of profit and loss in accordance with the type of hedge (fair value hedge).

The Company exposure to foreign currency risk at the end of the reporting period expressed in Rs. million, are as follows

Price risk

The Company’s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI (note 43)

At the reporting date, the exposure to unlisted equity securities at fair value was RS. 26.7 million. A decrease of 10% or increase of 10% in fair value of unlisted equity securities could have an impact of approximately RS. 2.6 million on the OCI or equity. These changes would not have an effect on statement profit and loss.

12. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.

13. EXCEPTIONAL ITEMS

Considering the current market situation, the Company has been rationalising its work force to match with the backlog and operating levels. During the current year, the Company had instituted a Voluntary Retirement Scheme (VRS) for its workmen at the Maneja (Vadodara) factory in August 2018, which was opted for by most workers. Consequently, considering viability, the plant operations at the factory were ceased with effect from 27 August 2018. The management is exploring various options to dispose off the land and building, including machinery and equipment related to the factory. These assets are therefore, classified as “Assets held for sale” and are measured at carrying value or fair value whichever is less. Cost relating to restructuring Rs. 577.9 million (previous year for Rs. 1,427.0 million) and loss on assets held for sale carried out Rs. 345.0 million (previous year Rs. nil) is represented under exceptional item.

14. CAPITAL MANAGEMENT

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital, as well as the level of dividends to equity shareholders.

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowing and the advantages and security afforded by a sound capital position.

The Company is having Nil borrowings as on 31 March 2019 (31 March 2018 : Nil).

15. The Company has established a comprehensive system of maintenance of information and documents as required by the transfer pricing regulation under Sections 92-92F of the Income-tax Act, 1961. Since, the law requires existence of such information and documentation to be contemporaneous in nature, the Company continuously updates its documentation to determine whether the transactions entered into with the associated enterprises during the financial year on an arm’s length basis. The management is of the opinion that such transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

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