DOING BUSINESS IN - storage.googleapis.com · b. FDI limit for Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service raised to 100%,

DOING BUSINESS ININDIA

DOING BUSINESS IN INDIA

Documentation issued in July 2016 by UCC & Associates LLP, an independent member of PrimeGlobal. The information provided is general information. Your company should check with a professional accountant to ensure that your issue is in line with the general information provided.

COMPANY FORMATION IN INDIA

MAIN FORMS OF COMPANY/BUSINESS IN INDIA

There are various models for starting a Business/Company in India, some of them useful for a foreign entity are as follows:

Liaison Offices (LO)Foreign Investors willing to look into the Indian market and promote their business before start of commercial operations can establish a liaison office. The liaison office acts as channel of communication with head office. A liaison office is permitted to do promotional activities and networking in India. A liaison office is not allowed to do any business activity or earn income in India.

Branch Office/Project OfficeEntities engaged in manufacturing/trading activities outside India can set up a branch office/ project office in India. A project office is a place to represent the interest of the foreign company executing a project in India for export/import of goods and rendering of services. Profits of a branch office are permitted to be remitted outside India subject to taxation in India. However, a branch office cannot engage itself in manufacturing/ processing activities in India.

Subsidiary/Joint Venture in form of Private Limited/Limited Companies/Partnership FirmsForeign entities which are starting operations in India, including setting up production processes, can set-up wholly owned subsidiaries or JV with Indian or Foreign partners with the maximum flexibility to conduct business in India. Permitted Sources of funding could be Equity or Equity with Debt.

SPECIFIC TAX CONCERNS RELATED TO ESTABLISHING A COMPANY

Of the major tax laws applicable in India, those that impact a foreign entity are as follows:

Central (Federal)1. Income Tax [including withholding taxes, dividend distribution tax] 2. Excise Duty3. Service Tax4. Customs Duty

State1. VAT2. Profession Tax

LEGAL ISSUES RELATED TO ESTABLISHING A COMPANY

Liaison Office: Prior approval of the Reserve Bank of India (RBI) is required and Intimation to Director General of Police of the State within 5 working days of entity becoming operational is required to be submitted.

Branch Office: Prior approval of RBI required (other than activities in Special Economic Zones, or SEZs), Intimation to Director General of Police of the State within 5 working days of entity becoming



Subsidiary / Joint Venture: No Prior approval required, Only post facto filings with RBI if comes under Automatic Route, Any other case Government of India (GOI)/Foreign Investment Promotion Board (FIPB) approval is required.

CULTURAL CONCERNS RELATED TO ESTABLISHING A COMPANY

1. India is a land of different cultures – too aggressive or forceful or confronting behavior should be avoided2. Both strongly held traditional values and emerging modern business practices are prevalent3. Greet with a handshake or namaste4. Always use formal titles (Mr., Dr., Sir, Madam) when greeting for first time5. Punctuality – be prepared for delays in appointments, particularly in Government offices6. Most Indians are reluctant to say no directly - try to understand the message behind the words7. Get to know your counterpart as a person and gain his trust8. Be willing to share a cup of tea/coffee and indulge in small talk before getting down to the main business9. Do not be offended at personal questions

OTHER COUNTRY-SPECIFIC ISSUES RELATED TO ESTABLISHING A COMPANY

1. Prohibited SectorsCertain sectors are prohibited for investment by a Non resident Entity including: Retail Trading (except single brand and online trading for food products), Atomic Energy, Lottery Business, Gambling & Betting; Real estate business or construction etc.; chit fund, Agriculture (excluding floriculture, horticulture, seed development, animal husbandry, pisciculture, cultivation of vegetables & mushrooms under controlled conditions, services related to agro and allied sectors) and plantations (other than tea plantations)

2. Foreign Direct Investment (FDI) approval is requiredFor sectors like - Petroleum sector (except refining), LNG/Gas pipelines, Commodity Exchange Infrastructure Companies in the Securities Market, Credit Information companies, Investment companies in infrastructure & services, Defence & Strategic Industries, Atomic Minerals etc.

3. Automatic Approval100% or below investment is permitted under automatic route for sectors not covered in 2 above.

4. Other Legal RequirementsIf you want to set up a business in India, you will be required to obtain registration with various authorities and obtain various permits like construction permits, Personal Account Number (PAN), Tax Deduction and Collection Account Number (TAN), registration under shop and establishment Act, Social Security registration, etc.

5. Recent Policy Measurea. 100% FDI under automatic route permitted in Brownfield Airport projectsb. FDI limit for Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service raised to 100%, with FDI upto 49% permitted under automatic route and FDI beyond 49% through Government approvalc. 100% FDI under Government route for retail trading, including through e-commerce, has been permitted in respect of food products manufactured and/or produced in Indiad. 100% FDI allowed in Asset Reconstruction Companies under the automatic routee. For establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting, approval of Reserve Bank of India would not be required in cases where FIPB approval or license/permission by the concerned Ministry/Regulator has already been granted



PERMANENT ESTABLISHMENT IN INDIA:BRANCH OR SUBSIDIARY?

DEFINITION OF A PERMANENT ESTABLISHMENT

The Indian Income Tax Act defines permanent establishment as follows: A permanent establishment includes a fixed place of business through which the business of the enterprise is wholly or partly carried on and does not include liaison office.

DEFINITION AND MAIN DIFFERENCES BETWEEN A BRANCH AND A SUBSIDIARY

Definition of SubsidiaryAn incorporated entity formed and registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders.

Distinguishing features of a Subsidiary:

1. Company form of organization and separate legal entity.2. The liability of the Parent company is limited to the extent of its shareholding in the Wholly Owned Subsidiary (WOS). The assets of the foreign company are not subject to any attachments 3. Minimum two directors are required, one of them being Indian.4. Quarterly board meeting & annual meeting of shareholder is compulsory in every year.5. Subsidiary is not treated as permanent establishment of foreign company, its income is taxed based on residential status.6. Transfer of shares is restricted, and deposits may not be accepted from the public.7. Only activities covered and approved in the Memorandum of Association are permitted.

Definition of Branch OfficeCompanies incorporate outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the Indian Central Regulatory Bank (RBI).

Distinguishing features of a Branch:

1. It is an extension of Head Office with right to accrue income in India and has no separate legal standing of its own.2. It can export/import goods, render professional/consultancy and information technology services, carry out research work in line with parent activities, promote technical & financial collaboration, represent the parent company in India, act as buying/selling agent, and render technical support for the products of the parent company.3. The liability of the Branch is unlimited. The assets of the parent company are at risk of attachment in case the liabilities of the branch exceeds its assets.4. Branch offices are managed by an Authorized Representative, resident in India (Country Manager).5. From a taxation perspective, a branch of a foreign company is deemed to be a ‘business connection’ of its parent, and thereby constitutes a taxable permanent establishment of the foreign enterprise.6. The entire expenses in India will be met either out of the funds received from head office through normal banking channels or through income generated by it in India.7. It can not expand its activities or undertake any new trading, commercial, or industrial activity other than that is expressly approved by the RBI.



TAX AND ACCOUNTING OBLIGATIONS

1. A Subsidiary Company incorporated in India is subject to minimum base rate of tax @ 30.9% (In case of turnover below 5 Crore base rate will be 29.87%), , whereas a Branch office is liable to pay minimum base rate of tax @ 41.2%2. Dividends can be paid after payment of Dividend Distribution Tax @ 18.176% by a subsidiary, whereas dividend distribution is free for a branch office.3. Tax Obligations applicable are: Income Tax, withholding taxes, Service Tax, Professional Tax, custom duty etc. for branches as well as subsidiaries.4. Provisions of Transfer pricing are applicable for branches as well as subsidiaries.5. Annual Accounts of Branches as well as subsidiaries are required to be audited by a Chartered Accountant of India.

REGISTRATION FORMALITIES

Branch Office(i) Parent company must have a profit making track record during the immediately preceding five years and net worth of not less than USD $100,000 or its equivalent.(ii) Required to Obtain PAN/TAN, Service tax code, Shops and Establishment Act Registration, Importer Export Code, VAT, Registrar of Companies (ROC) Registration.(iii) Normally registration is allowed for a period of three years.

Subsidiary(i) A private company is required to be incorporated with a minimum authorized & paid up capital as may be prescribed and minimum two subscribers. No requirement of track record of parent company as shareholder.(ii) Required to Obtain PAN/TAN, Service tax code, Shops and Establishment Act Registration, Importer Export Code, VAT.(iii) Once registration is granted it can do business, until the company decides to close down its operations.

STANDARD LEGAL OBLIGATIONS AND FORMALITIES FOR A BRANCH

BRANCH OFFICE

A. Filings:

1. Yearly filings include the filing of audited accounts of Branch Office, World Accounts with Registrar of Companies2. Yearly submission of Activity Certificate with RBI and AD Bank3. Annual return with the Income Tax Department4. Filing of Quarterly/ Monthly TDS returns, VAT, Service Tax Returns

B. Other Legal Obligations/Provisions:

1. The Branch Office will not accept any deposits in India2. The commission earned by the Branch Office from parties abroad for any agency business will be repatriated to India through normal banking channels.3. The Branch office shall not undertake any retail trading activity4. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.5. The Branch Office is not allowed to borrow locally unless the prior approval of RBI is given.



HOW TO HIRE MY FIRST EMPLOYEE IN INDIA

India has around 487 million workers, the second largest after China. Indian young workforce is growing rapidly and increasing energy in Indian Markets. Despite having second largest workforce in India manpower is economical.

MAIN LEGAL STEPS TO FOLLOW TO HIRE A FIRST EMPLOYEE

Hiring first employee in India is an easy task in India.

A. For domestic employee, an entity is required to take care of two aspects only, which are as follow:

1. Compliance with Minimum Wages, which is at present around USD $3,000 Per Annum.2. Compliance with provisions of withholding taxes applicable in India.

B. Hiring a Foreign resident is subject to fulfillment of certain conditions. Some of them are as follows:

1. Employee is required to obtain an employment visa.2. Employment visas will not be granted for jobs for which qualified Indians are available. Employment visas will also not be granted for routine, ordinary, or secretarial/clerical jobs.3. Minimum Wages prescribed are USD $25,000 Per Annum.

Other Statutory CompliancesIn India, labour laws related to social security of employees becomes effective when there are at least 10 employees in the entity. Some of the Labour laws applicable in India are as follows:

1. Provident Fund (Social Security)2. Gratuity3. Employees State Insurance4. Professional Tax and5. Contribution to Labour Welfare funds etc.

DESIGN AND CONTENTS OF AN EMPLOYMENT CONTRACT

The Employment contract is generally quite flexible and is made to cover the needs of an entity. It will generallycover the following salient features:

1. Period of employment2. Areas of work and reporting responsibility3. Work location and working hours per week4. Compensation5. Vacation and leaves6. Compliance with Company Policies and Laws7. Confidentiality8. Non compete clause9. Termination and Notice period



CAN SOMEBODY DO BUSINESS FOR ME AND NOT BE AN EMPLOYEE?

Yes, it is permitted in India for a person to work an entity and not being employee. These are the ways a person can be hired to work:

1. Consultant/Contractual Worker: A person can be engaged directly act as a consultant or contractual worker for an organization without being an employee. Here liability for withholding taxes shall trigger above a particular threshold.

2. As an Agent to Foreign Entity: A person can work as an agent of foreign entity. An agent does all acts on behalf of the principal, and the principal is bound by the acts of agent for which an authority is granted to the agent.

3. Outsourced Workers: An entity can hire a manpower supply agency, which in turn will select workers based on requirement of entity and engage them with the business entity. These workers work under control and supervision of the business entity. Normally all the statutory compliances in this regard are taken care by the manpower supply agency; failing that, the entity shall be liable. Here the entity is responsible for the supervision and direction of such workers.

4. Outsourcing of Services: Many services can be outsourced or done by freelancers. This work may include accounting, manufacturing, website design, marketing ,and public relations. Here the work responsibility also lies with the outsourced agency.



HOW TO READ FINANCIAL STATEMENTS IN INDIA

ILLUSTRATIVE FINANCIALS LIMITED

Balance sheet as at 31st March, 2015 Rs. in million

Particulars Note No. 31st March, 2015 31st March, 2014

A Equity and

Liabilities

Shareholders'

funds (a) Share capital (b) Reserves and surplus

Non-Current Liabilities (a) Other long-term liabilities (b) Long-term provisions

Current Liabilities

(a) Trade payables (b) Other current liabilities (c) Short term provisions

TOTAL

Assets

Non-current assets (a) Fixed assets

(i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress

(b) Non-current investments (c) Deferred tax assets (net) (d) Long-term loans and advances

Current Assets

(a) Current Investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances (f) Other current assets

TOTAL

See accompanying notes forming part of the financial statements

1

3 - - 4 - - - -

2

5 - - 6 - - - -

3 7 - - 8 - - 9 - - - -

- -

B

1

10A - - 10B - - - - - - 11 - - 12 - - 13 - - - -

2 14 - - 15 - - 16 - - 17 - - 18 - - 19 - - - -

- -

C

-

In terms of our report attached For XYZ Chartered Accountants

For and on behalf of the Board of Directors

Name of Partner Partner

Name of Chairman Chairman

Name of MD & CEO Managing Director and

CEO

Name of Director Director

Name of CS

Name of Independent

Director

Name of Independent

Director Company Secretary Independent Director Independent Director

Place: Place: Date: dd/mm/yyyy Date: dd/mm/yyyy




Balance sheet as at 31st March, 2015 Rs. in million

Particulars Note No. 31st March, 2015 31st March, 2014

A Equity and

Liabilities

Shareholders'

funds (a) Share capital (b) Reserves and surplus

Non-Current Liabilities (a) Other long-term liabilities (b) Long-term provisions

Current Liabilities

(a) Trade payables (b) Other current liabilities (c) Short term provisions

TOTAL

Assets

Non-current assets (a) Fixed assets

(i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress

(b) Non-current investments (c) Deferred tax assets (net) (d) Long-term loans and advances

Current Assets

(a) Current Investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances (f) Other current assets

TOTAL

See accompanying notes forming part of the financial statements

1

3 - - 4 - - - -

2

5 - - 6 - - - -

3 7 - - 8 - - 9 - - - -

- -

B

1

10A - - 10B - - - - - - 11 - - 12 - - 13 - - - -

2 14 - - 15 - - 16 - - 17 - - 18 - - 19 - - - -

- -

C

-

In terms of our report attached For XYZ Chartered Accountants




Name of MD & CEO Managing Director and

CEO


Name of CS

Name of Independent

Director

Name of Independent






Statement of Profit and Loss for the year ended 31st March, 2015 Rs. in million except Earnings per Share

Particulars Note No. For the year ended 31st March, 2015

For the year ended 31st March, 2014

I.

Revenue from operations

20

-

-

II. Other income 21 - - III. Total revenue (I+II) - 0

IV.

Expenses

(a) Employee benefits expense 22 - - (b) Subcontracting cost (c) Finance costs 23 (d) Depreciation and Amortization expense 10 (e) Other expenses 24 - - Total expenses - -

V.

Profit before tax

-

VI. Tax expenses: (a) Current tax (b) Deferred tax - -

VII. Profit for the year - -

VIII.

Earnings per Equity share (Face value of Rs. yy/- each)

(a) Basic (b) Diluted

IX See accompanying notes forming part of the financial statements

In terms of our report attached For XYZ LLP Chartered Accountants




Name of MD & CEO Managing Director and CEO


Name of Company Secretary

Name of Independent Director

Name of Independent






Rs. in million For the year

ended 31st

For the year ended 31st

A] CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax

Adjustments for: Depreciation and amortization (Profit)/loss on sale of fixed assets Interest Expense Interest income Dividend income Unrealized foreign exchange difference (net) Employee stock compensation cost Reversal of provision no longer required Profit on sale of Current Investment

Operating Profit before working capital

changes Adjustments for changes in

working capital: Increase/ (Decrease) in Trade payable, other liabilities and provisions Increase / (Decrease) in Trade receivables Increase / (Decrease) in Other assets and loan advances

Cash generated from operations Direct Taxes Paid Net cash flows from operating activities (A)

B] CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Fixed Assets Interest Received Dividend Received Purchase of Investments Sale of Investments Sale of Fixed Assets Loan given to Subsidiary

Net Cash flows from/(used in) investing activities (B)

C] CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings Interest Paid

Net cash flows from/(used in) financing activities (C)

D] Exchange differences on translation of foreign currency cash and cash equivalents Net Increase / (decrease ) in cash and cash equivalents (A + B+ C + D)

Cash & cash equivalents at the end of year (refer note 1 below) Cash & cash equivalents at the beginning of the year Net Increase / (decrease ) in cash and cash equivalents

-

-

-

- -




Rs. in million For the year

ended 31st


A] CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax

Adjustments for: Depreciation and amortization (Profit)/loss on sale of fixed assets Interest Expense Interest income Dividend income Unrealized foreign exchange difference (net) Employee stock compensation cost Reversal of provision no longer required Profit on sale of Current Investment

Operating Profit before working capital

changes Adjustments for changes in

working capital: Increase/ (Decrease) in Trade payable, other liabilities and provisions Increase / (Decrease) in Trade receivables Increase / (Decrease) in Other assets and loan advances

Cash generated from operations Direct Taxes Paid Net cash flows from operating activities (A)

B] CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Fixed Assets Interest Received Dividend Received Purchase of Investments Sale of Investments Sale of Fixed Assets Loan given to Subsidiary

Net Cash flows from/(used in) investing activities (B)

C] CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings Interest Paid

Net cash flows from/(used in) financing activities (C)

D] Exchange differences on translation of foreign currency cash and cash equivalents Net Increase / (decrease ) in cash and cash equivalents (A + B+ C + D)

Cash & cash equivalents at the end of year (refer note 1 below) Cash & cash equivalents at the beginning of the year Net Increase / (decrease ) in cash and cash equivalents

-

-

-

- -




Rs. in million

Particulars

For the year ended

For the year

ended 31 Note 1:

Cash and cash equivalents include: Cash on hand Remittances in transit Balance with banks - In current accounts - In deposit accounts

Total Cash and cash equivalents - Refer Note 17 - -

In terms of our report attached For XYZ LLP Chartered Accountants




Name of MD & CEO Name of Director Managing Director and CEO Director

Name of Company Secretary


Name of Independent

Director

Company Secretary Independent Director Independent Director





Notes to the financial statements

1 General Information-(Company information to be disclosed i.e. Date of Incorporation & Business profile )

2 Summary of significant accounting policies-

2.1 Basis of preparation- These financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India on accrual basis under the historical cost convention, except for certain financial instruments which are measured at fair value. These financial statements have been prepared in accordance with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act")/ Companies Act, 1956 ("the 1956 Act"), as applicable in accordance with the accounting principles generally accepted in India. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

Accounting policy is to be given in respect of the followings given below-:

Tangible Assets Intangible Assets Borrowing Costs Impairment of Assets Investments Inventories Foreign currency translation Revenue Recognition Other Income Employee Benefits Employee Share-based Payments Current and deferred tax Provisions and Contingent Liabilities Leases Segment Reporting Cash and Cash Equivalents Earnings per Share Amalgamation in the nature of merger



UCC & ASSOCIATES LLP (INDIA) 7 March2015

ILLUSTRATIVE FINANCIALS LIMITED Notes forming part of the Financial

Statements Note 3 - Share capital:

Notes:

(i) Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the year:

Particulars As at 31st March, 2015 31st March, 2014

Number Rs. in million Number Rs. in million

Equity Shares Closing Balance

-

-

-

-

(ii) Terms, rights and restrictions attached

to:

Equity Shares: The Company has equity shares having par value of Rs. y per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amount. The distribution will be in proportion to the equity shares held by the shareholders.

Series A X % fully convertible non-cumulative preference shares: The Company has class of fully convertible non-cumulative redeemable preference shares having a par value of Rs. y per share. Non-cumulative redeemable preference shares carry cumulative dividend @ X % per annum.

(iii) Details of shares held by the holding company

Particulars Number of Shares

As at 31st March, 2015 As at 31st March, 2014

ABC Limited

-

-

(iv) Details of equity shares held by shareholder holding more than 5%:

Name of shareholder As at 31st March, 2015 As at 31st March, 2014 No of Shares % of Holding No of Shares % of Holding

ABC Limited

xxx

70.00%

xxx

70.00%

PQR Limited xx 20.00% xx 20.00% SPR Private Limited xx 6.00% xx 6.00%

(v) Shares reserved for issue under options

Equity shares reserved for issue under the employees stock option plan (ESOP) of the Company

Particulars

As at 31st March, 2015 31st March, 2014

Number Rs. in million Number Rs. in million

(a) Authorized : Equity shares of Rs. yy each Series A X % fully convertible non-cumulative preference shares of Rs. y each

(b) Issued, subscribed and fully paid up :

Equity shares of Rs. y each fully paid up

Total

xx yy

-

- -

-

xx yy

-

- -

-

- - - -




ILLUSTRATIVE FINANCIALS LIMITED Notes forming part of the Financial Statements

Note 4 - Reserves and surplus:

Rs. in million

Particulars As at

31st March, 2015 31st March, 2014

Securities premium

account Hedging

Reserve Opening balance On initial adoption of AS-30 Less: Transferred to Statement of Profit and Loss on occurrence of forecasted hedge transactions Add/(less): change in fair value of forward contracts (net) Closing balance

Share options outstanding account Opening balance Add: amortized amount of stock compensation cost (net) Less: transfer to surplus in the statement of Profit and Loss on account of cancellation/forfeiture of options Closing balance

Surplus in the statement of profit and loss

Opening balance Add: transfer on account of ESOP unexercised Add: profit for the year Less: on initial adoption of AS-30 Closing balance

Total

-

-

-

-

- - - -

- - - -

-

-

- -

- - - -

-

-

- - - - - -

- -

- -

Note 5 - Other long-term liabilities:

Rs. in million Particulars As at


Unearned revenue

Total

-

-

-

-

- - - -

Note 6 - Long-term provisions:



Provision for employee benefits

-Provision for gratuity (Refer Note 25) -Provision for compensated absences

Total

- - - -





Note 7 - Trade payables:

Rs. in million

Particulars As at 31st March, 2015 0

Trade payables other than Accrued Salaries and Benefits

Accrued Salaries and Benefits

Total

-

-

-

-

- -

Note 8 - Other current liabilities: Rs. in million

Particulars As at

31st March, 2015 31st March, 2014 Current maturities of long-term debt (Refer note 5)

-

-

Interest accrued and due on borrowings - - Income received in advance - - Unpaid dividends [Refer note (a) below] - -

Application money received for allotment of securities and due for - - refund (including interest due) Advances from customers - - Employee benefits payable - - Statutory dues including provident fund and tax deducted at source - - Unamortized premium on forward contract - -

Total - -

Note 9 - Short term provisions:


31st March, 2015 31st March, 2014 Provision for employee benefits

-Provision for gratuity -Provision for compensated absences

Provision for income tax (net of taxes paid)

Provision for warranties

Total

- -

- -



ILLUSTRATIVE FIN

ANCIALS LIM

ITED

Notes form

ing part of the Financial Statements

Note 10 - Fixed assets

Rs. in million

Particulars Gross Block

Accumulated D

epreciation / Amortization

Net Block

As at 1st April, 2014

Additions during the

year

Disposals

during the year

As at 31st M

arch, 2015

As at 1st April, 2014

For the year O

n disposal for the year

As at 31st M

arch, 2015

As at 31st M

arch, 2015

As at 31st M

arch, 2014

A.Tangible Assets

Plant and equipm

ents (Previous year)

Furniture and fixtures (Previous year)

Office equipm

ents (Previous year)

Im

provement to leased prem

ises (Previous year)

Total

Previous year

B.Intangible Assets (O

ther than internally generated)

Computer softw

are (Previous year)

Intellectual property rights (Previous year)

Total

Previous Year

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

-





Note 11 - Non-current investments: Rs. in million

Particulars As at 31st March, 2015 0

TRADE (UNQUOTED/QUOTED) Investments in Instruments (At Cost)

ABC Limited A wholly owned subsidiary incorporated in --- Country xx (Previous year: x) Common Stock of USD x each, fully paid up

Total

-

-

- - Gross amount of unquoted investments - -

- - Note 12 - Deferred tax assets (net):

Rs. in million


Break up of deferred tax assets

Nature of timing differences - Impact of expenditure charged to the Statement of profit & loss but allowed for

tax purposes on payment basis - Provision for gratuity and compensated absences - Provision for doubtful debts and advances - Provision for depreciation - Provision for incentives

Total

-

-

- - - - - - - -

- -

Note 13 - Long-term loans and advances:

Rs. in million

Particulars

As at 31st March, 2015 31st March, 2014

(Unsecured, considered good unless otherwise stated)

Loans and advances to related parties (Refer Note 28) Dues from subsidiary companies Loan to subsidiary Capital advances Considered good Considered doubtful Provision for doubtful advances Security deposits Considered good Considered doubtful Provision for doubtful security deposits Advance income taxes (net of provisions)

Prepaid expenses

Total

-

-

- - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -





Note 14 - Current Investments:



Investments in Mutual Funds (unquoted) (Non-trade) (at Cost or NRV whichever is lower)

x (Previous year: xx ) units of Rs.xy (Previous year: xx) - UTI-Treasury advantage fund-institutional plan-Growth

x (Previous year: xx ) units of Rs. xy (Previous year: xx) - Baroda Pioneer Liquid Fund plan A-Daily Dividend-Reinvestment

Total

Note 15 - Inventories:

Rs. in million


(Valued at lower of cost and net realizable value) Stores and spares Loose tools Packing material Raw materials (includes in transit: Rs.x, March 31, 2014: Rs. y) Work-in progress Finished goods Traded goods

Total

Note 16 - Trade receivables:

Rs. in million

Particulars As at


Trade Receivables (Unsecured) Over Six Months - Considered good* - Considered doubtful

Others - Considered good** - Considered doubtful

Total

Less: Provision for doubtful trade receivables

Total

- -

-

-

-

-

-

-

-

-

- -

Note 17 - Cash and cash equivalents:



Cash on hand Remittances in transit Balances with banks:

- In current accounts - In deposit accounts

Of the above, the balances that meet the definition of Cash and cash equivalents as per AS 3 Cash Flow Statements is ----





Note 14 - Current Investments:



Investments in Mutual Funds (unquoted) (Non-trade) (at Cost or NRV whichever is lower)

x (Previous year: xx ) units of Rs.xy (Previous year: xx) - UTI-Treasury advantage fund-institutional plan-Growth

x (Previous year: xx ) units of Rs. xy (Previous year: xx) - Baroda Pioneer Liquid Fund plan A-Daily Dividend-Reinvestment

Total

Note 15 - Inventories:

Rs. in million


(Valued at lower of cost and net realizable value) Stores and spares Loose tools Packing material Raw materials (includes in transit: Rs.x, March 31, 2014: Rs. y) Work-in progress Finished goods Traded goods

Total

Note 16 - Trade receivables:

Rs. in million

Particulars As at


Trade Receivables (Unsecured) Over Six Months - Considered good* - Considered doubtful

Others - Considered good** - Considered doubtful

Total

Less: Provision for doubtful trade receivables

Total

- -

-

-

-

-

-

-

-

-

- -

Note 17 - Cash and cash equivalents:



Cash on hand Remittances in transit Balances with banks:

- In current accounts - In deposit accounts

Of the above, the balances that meet the definition of Cash and cash equivalents as per AS 3 Cash Flow Statements is ----



Note 18 - Short-term loans and advances:




Loans and advances to related parties Due from subsidiary company

Other Loans and advances

- Loans and advances to employees - Considered good

Considered doubtful

Provision for doubtful advances

- Prepaid expenses

- Advance to suppliers - Considered good - Considered doubtful


- Balance with Government authorities - Others

Total

- -

- -

- 0

- -

-

- -

Note 19 - Other current assets: Rs. in million


Unbilled Revenue (Net of Provision of Rs. xx million (Previous year: Rs.

-

-

Interest accrued - - Fair values of foreign exchange forward contracts - -

Total - -

Note 20 - Revenue from operations: Rs. in million

Particulars For the year ended 31st March 2015

For the year ended 31st March 2014

Sale of products Finished goods Traded goods Sale of Services Other Operating Revenue Scrap Sales

Less: Excise Duty Total

- -

- - -

Note 21 - Other income:

Particulars For the year ended 31st March, 2015


Interest Income Dividend income From Subsidiaries Net profit on sale of fixed assets Claims received from Insurance company Share of profits from partnership firm Lease rentals Liabilities written back to the extent no longer required Miscellaneous Income

Total

- -

-

- - -

- - -










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -












Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -



Note 22. Employee benefits expense: Rs. in million



Salaries, wages and bonus

-

-

Contribution to provident and other funds - - Gratuity - - Employee stock compensation cost - - Staff welfare expenses - -

Total - -

Note 23. Finance costs:

Particulars For the year ended 31st


Interest Expense:

Interest on long term borrowings - - Interest on shortfall of advance tax - - Other borrowing costs - - Applicable net loss on foreign currency transactions and - - translation - - Commitment charges on borrowings - - Others - - Net (gain)/loss on foreign currency transactions and translations - (considered as finance costs)

Total - -

Note 24. Other expenses: Rs. in million



Consumption of stores and spare parts

Excise Duty Power and fuel Rent Repairs to buildings Repairs to machinery Repairs - others Insurance Rates and taxes Travelling Expenses Directors Fees Payment to Auditors As auditor: Audit Fee Tax Audit Fee Taxation matters Company law matters Management services Other services Reimbursement of Expenses Expenditure towards Corporate Social Responsibility

activities Professional fees Printing and Stationery - -

-

Communication Expenses Provision for diminution in the value of long term investments Provision for mark to market losses on derivatives

Total - -





Note 22. Employee benefits expense: Rs. in million



Salaries, wages and bonus

-

-

Contribution to provident and other funds - - Gratuity - - Employee stock compensation cost - - Staff welfare expenses - -

Total - -

Note 23. Finance costs:



Interest Expense:

Interest on long term borrowings - - Interest on shortfall of advance tax - - Other borrowing costs - - Applicable net loss on foreign currency transactions and - - translation - - Commitment charges on borrowings - - Others - - Net (gain)/loss on foreign currency transactions and translations - (considered as finance costs)

Total - -

Note 24. Other expenses: Rs. in million



Consumption of stores and spare parts

Excise Duty Power and fuel Rent Repairs to buildings Repairs to machinery Repairs - others Insurance Rates and taxes Travelling Expenses Directors Fees Payment to Auditors As auditor: Audit Fee Tax Audit Fee Taxation matters Company law matters Management services Other services Reimbursement of Expenses Expenditure towards Corporate Social Responsibility

activities Professional fees Printing and Stationery - -

-

Communication Expenses Provision for diminution in the value of long term investments Provision for mark to market losses on derivatives

Total - -










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -




ILLUSTRATIVE FINANCIALS LIMITEDNotes forming part of the Financial Statements

25. Employee Benefits

a) Defined Contribution Plan - Provident FundAmounts recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs. xx million (year ended 31st March, 2014 : Rs. yy million).

b) Defined Benefit Plani) Actuarial gains and losses in respect of defined benefit plans are recognised in the Statement of Profit and Loss.ii) The Defined Benefit Plans comprise of Gratuity.Gratuity is a benefit to an employee based on 15 days last drawn salary

for each completed year of service.The defined benefit plan is funded.

I] Changes in the present value of defined obligation representing reconciliation of opening and closing balances thereofare as follows:

Rs. in millionParticulars As at 31st March,2015 As at 31st March,2014

Present Value of Defined Obligation as at the beginning of the yearCurrent Service CostInterest costBenefits PaidActuarial (gains)/ losses on obligationActuarial gains on fair valuePresent Value of Defined Benefit Obligation as at the end of the year - -

II] Change in the fair value of plan assets representing reconciliation of opening and closing balances thereof are asfollows:


Opening fair value of plan assetsExpected return on plan assets Contributions by employerBenefits PaidActuarial GainClosing fair value of plan assets at end of the year - -

III] Reconciliation of Present Value of Defined Benefit Obligation and fair value of plan assets showingamount recognised in the Balance Sheet: Benefit assets/ (liability)


Present value of defined benefit obligation - -Fair value of plan assets - -Funded status [Surplus/(Deficit)] - -Net Asset/(Liability) recognised in Balance Sheet - -

IV] Components of employer expenses recognised in the Statement of Profit and Loss for year ended 31st March, 2015Rs. in million

Particulars As at 31st March,2015 As at 31st March,2014

Current Service Cost - -Interest Cost - - Expected return on plan assets - - Net Actuarial (Gain)/ Loss - - Total expense recognised in the Statement of Profit & Loss - -

V] In respect of Funded Benefits with respect to gratuity, the fair value of Plan assets represents the amounts investedthrough "Insurer Managed Funds"










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -





25. Employee Benefits

a) Defined Contribution Plan - Provident FundAmounts recognized as an expense in the Statement of Profit and Loss in respect of defined contribution plan is Rs. xx million (year ended 31st March, 2014 : Rs. yy million).

b) Defined Benefit Plani) Actuarial gains and losses in respect of defined benefit plans are recognised in the Statement of Profit and Loss.ii) The Defined Benefit Plans comprise of Gratuity.Gratuity is a benefit to an employee based on 15 days last drawn salary

for each completed year of service.The defined benefit plan is funded.

I] Changes in the present value of defined obligation representing reconciliation of opening and closing balances thereofare as follows:


Present Value of Defined Obligation as at the beginning of the yearCurrent Service CostInterest costBenefits PaidActuarial (gains)/ losses on obligationActuarial gains on fair valuePresent Value of Defined Benefit Obligation as at the end of the year - -

II] Change in the fair value of plan assets representing reconciliation of opening and closing balances thereof are asfollows:


Opening fair value of plan assetsExpected return on plan assets Contributions by employerBenefits PaidActuarial GainClosing fair value of plan assets at end of the year - -

III] Reconciliation of Present Value of Defined Benefit Obligation and fair value of plan assets showingamount recognised in the Balance Sheet: Benefit assets/ (liability)


Present value of defined benefit obligation - -Fair value of plan assets - -Funded status [Surplus/(Deficit)] - -Net Asset/(Liability) recognised in Balance Sheet - -

IV] Components of employer expenses recognised in the Statement of Profit and Loss for year ended 31st March, 2015Rs. in million

Particulars As at 31st March,2015 As at 31st March,2014

Current Service Cost - -Interest Cost - - Expected return on plan assets - - Net Actuarial (Gain)/ Loss - - Total expense recognised in the Statement of Profit & Loss - -

V] In respect of Funded Benefits with respect to gratuity, the fair value of Plan assets represents the amounts investedthrough "Insurer Managed Funds"










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -


VI] Assumptions As at 31st March,2015 As at 31st March,2014

Discount Rate 7.80% 8.60%

Expected Rate of Returns on Plan Assets 8.00% 7.50%Salary Escalation 8.00% 8.50%Employee separation Rate 17.00% 17.00%

a) The Discount rate is based on the prevailing market yields of Indian Government securities as at the Balance Sheet date for the estimated terms of the obligations.b) Expected Rate of Return on Plan Assets: This is based on the expectation of the average long-term rate of return expected oninvestments of the Fund during the estimated term of obligations.c) Salary Escalation Rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion

and other relevant factors.

VII] Experience HistoryRs. in million

Particulars 31st March,2015

31st March,2014

31st March

31st March

31st March

Present value of obligation as at the end of the yearFair value of the plan assets at the end of the yearSurplus / (Deficit)Experience adjustment on plan Liabilities (loss) / gainExperience adjustment on plan Assets (loss) / gainActuarial gain/(loss) due to change in assumptions

26. Employee Stock Option PlansThe company provides share based payment scheme to its employees "ESOP Plan".

27. Leases

i) Operating Lease - As a LesseeObligations towards non-cancellable operating Leases

The Company has taken premises an operating lease for the period of x to y years. The expenses of such lease rentals recognised in the statement of Profit and loss account for the year ended March 31, 2015 is Rs. xx Million (yearended 31st March, 2014: Rs yy Million). The future lease payments of such operating lease are as follows:-

Rs. in millionParticulars As at

31st March 2015As at

31st March 2014

Minimum Lease Payments- Not later than one year- Later than one year and not later than five years- Later than five years

28. Related Party Disclosure

a)Name of the related party and nature of relationship:-

Name of the Entity* Nature of relationshipABC LimitedPQR Limited

XYZ Limited ABC Pvt Limited.

Name of Director

Name of CFO

Holding company Subsidiary

SubsidiaryEnterprise where the Company is

in a position to exercise control

Managing Director and ChiefExecutive Officer

Chief Financial Controller

*We have disclosed only those related parties with whom company has transactions during the year.




VI] Assumptions As at 31st March,2015 As at 31st March,2014

Discount Rate 7.80% 8.60%

Expected Rate of Returns on Plan Assets 8.00% 7.50%Salary Escalation 8.00% 8.50%Employee separation Rate 17.00% 17.00%

a) The Discount rate is based on the prevailing market yields of Indian Government securities as at the Balance Sheet date for the estimated terms of the obligations.b) Expected Rate of Return on Plan Assets: This is based on the expectation of the average long-term rate of return expected oninvestments of the Fund during the estimated term of obligations.c) Salary Escalation Rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion

and other relevant factors.

VII] Experience HistoryRs. in million

Particulars 31st March,2015

31st March,2014

31st March

31st March

31st March

Present value of obligation as at the end of the yearFair value of the plan assets at the end of the yearSurplus / (Deficit)Experience adjustment on plan Liabilities (loss) / gainExperience adjustment on plan Assets (loss) / gainActuarial gain/(loss) due to change in assumptions

26. Employee Stock Option PlansThe company provides share based payment scheme to its employees "ESOP Plan".

27. Leases

i) Operating Lease - As a LesseeObligations towards non-cancellable operating Leases

The Company has taken premises an operating lease for the period of x to y years. The expenses of such lease rentals recognised in the statement of Profit and loss account for the year ended March 31, 2015 is Rs. xx Million (yearended 31st March, 2014: Rs yy Million). The future lease payments of such operating lease are as follows:-

Rs. in millionParticulars As at

31st March 2015As at

31st March 2014

Minimum Lease Payments- Not later than one year- Later than one year and not later than five years- Later than five years

28. Related Party Disclosure

a)Name of the related party and nature of relationship:-

Name of the Entity* Nature of relationshipABC LimitedPQR Limited

XYZ Limited ABC Pvt Limited.

Name of Director

Name of CFO

Holding company Subsidiary

SubsidiaryEnterprise where the Company is

in a position to exercise control

Managing Director and ChiefExecutive Officer

Chief Financial Controller

*We have disclosed only those related parties with whom company has transactions during the year.










Considered doubtful


- Prepaid expenses




Total

- -

- -

- 0

- -

-

- -




-

-


Total - -






- -

- - -





Total

- -

-

- - -

- - -



ILL

UST

RA

TIV

E FIN

AN

CIA

LS

LIM

ITE

DN

otes forming part of the FinancialStatem

ents

b)T

ransactions with R

elatedParties(to be given for both current and previous years):

Rs. in

million

Transactions for the year ended 31st M

arch,2015B

alance as at 31st March,2015

Debit/(C

redit)

ParticularsSales

InterestIncom

e

Cost of

Goods/

service(received)/provided

Sale/(Purchase)ofFixed

Assets /

Inventory

Reim

bursementof expense(net)

Donation

(CorporateSocial

Responsibil

ity)

Manageri

alRem

uneration

Trade

Receivab

le

Unbilled

Trade

PayablesL

oans &A

dvances

Investme

nt

InterestA

ccrued

Advancefrom

Custom

ers

Accrued

benefitpayable

SubsidiaryC

ompanies

PQR

Limited

XY

ZLim

ited

Holding C

ompany

AB

CLim

ited

Enterprise w

here the C

ompany is in

aposition to exercisecontrol

AB

C Private

Limited

Key M

anagementPersonnel

Nam

e ofDirector

Nam

e of CFO





29 Contingent Liabilities and Commitments:

(i) Contingent Liabilities:Rs. in million

Sr. Particulars As at 31st March, As at 31st March,12

Bank Guarantees Income tax mattersOther claims against the company not acknowledged as debts

(ii) Commitments :Rs. in million

Sr. Particulars As at 31st March, As at 31st March,

1 Estimated amount of contracts remaining to be executed oncapital account andnot provided for

30. Based on the information available with the company, no creditors have been identified as "Supplier" within the meaningof Micro, Small andMedium Enterprises Development (MSMED) Act, 2 0 0 6 .

31 Expenditure in Foreign CurrencyRs. in million

Particulaars 31st March, 2015 31st March, 2014

Travelling Expenses Software Services ChargesLegal & Consultancy ChargesConference, Freight & Other ExpensesEmployee benefits expensesTotal

0 0

32. Value of import calculated on CIF Basis

33. Earnings in Foreign Currency

Rs. in million

Rs. in millionParticulars 31st March, 2015 31st March, 2014

Sale of equipment and softwarelicensesRendering of servicesTotal

0 0

34.Auditors Remuneration Rs. in millionParticulars 31st March, 2015 31st March, 2014

Audit Fees (including quarterly audits)For other servicesFor taxation matterFor reimbursement of expensesTotal

0 0

Particulars 31st March, 2015 31st March, 2014

Capital GoodsPurchase of equipment and software licensesTotal

0 -





35 Basic and Diluted Earnings per shareRs. in million except earnings per share

Particulars As at 31 March,2015

As at 31 March,2014

Nominal value per equity shareProfit for the yearProfit attributable to equity shareholders

Weighted average number of equity sharesWeighted average number of diluted equity shares

No. ofShares

No. ofShares

36 Details of provisions and movements in each class of provisions as required by the AccountingStandard on Provisions, Contingent Liabilities and Contingent assets (Accounting Standard-29)

Warranty Provision: Rs. in millionParticulars As at 31 March,

2015As at 31st March,

2014Carrying amount as at the beginning of the yearAdd: Additional provision made during the yearLess: Provision reversed during the year

Carrying amount as at the end of the period - -

Note: Provision for warranty is estimated and made based on technical estimates of the management and isexpected to be settled over the period of next year

37 Other notes to balance sheet as per company based disclosure for outsiders

In terms of our report attached For XYZ LLP Chartered Accountants For and on behalf of the Board of Directors


Name of Chairman Name of MD & CEO Name of Director Chairman Managing Director and CEO Director

Name of Company Secretary Name of Independent Director


Company Secretary Independent Director Independent Director


Documents

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