BAJAJ AUTO LIMITED
ANNUAL REPORT 2010-2011
NOTES ON ACCOUNTS
Notes forming part of financial statements:
1. Significant Accounting Policies followed by the Company are as stated in
the Statement annexed to this schedule.
(Rs. In Crore)
2011 2010
2. (a) Contingent liabilities not
provided for in respect of:
(i) Claims against the Company not 422.49 411.28
acknowledged as debts
(ii) Guarantees given by the Company to banks, 23.19 23.35
on behalf of its subsidiary,
PT Bajaj Auto Indonesia
(iii) Guarantees given by the Company to Housing
Development Finance Corporation Ltd.
- For loans to Employees 0.22 0.45
(iv) Excise and Customs demand-matters under 122.70 68.12
dispute and Claims for refund of Excise Duty,
if any, against Excise Duty Refund received in
the earlier year
(v) Sales Tax matters under dispute 328.41 276.45
(vi) Claims made by temporary workmen
Pending before various judicial/appellate Liability, Liability
authorities in respect of similar matters unascertained unascer-
adjudicated by the Supreme Court in the past. tained
The matter is contingent on the facts and
evidence presented before the courts
/adjudicating authorities and not necessarily
likely to be influenced by the Supreme Courts
order
(b) The Company has imported Capital Goods
under the Export Promotion Capital Goods
Scheme, of the Government of India, at
concessional rates of duty on an undertaking
to fulfill quantified exports. The future
obligation aggregates to USD 559 million
(Previous Year USD Nil).
Minimum export obligation to be fulfilled by
the company under the said scheme by 31 March
2011 has been fulfilled. Non-fulfillment of the
balance of such future obligation in the manner
required, if any, entails options/rights to the
Government to confiscate capital goods imported
under the said licences and other penalties
under the above-referred scheme.
3. Estimated amounts of contracts remaining to 62.65 38.60
be executed on capital account and not provided
for, Net of Advances.
4. Payments to Auditors:
(Rs. In Crore)
Auditors Cost Auditors
2011 2010 2011 2010
(i) As Auditors 0.60 0.60 0.04 0.03
(ii) In other capacity:
For tax audit 0.08 0.08 - -
For limited review 0.06 0.06 - -
Certificates & other matters 0.07 0.05 - -
Sub-Total 0.81 0.79 0.04 0.03
(iii) For expenses 0.06 0.04 - -
Total 0.87 0.83 0.04 0.03
5. C.I.F Value of Imports, Expenditure and Earnings in Foreign Currencies
etc:
(Rs. In Crore)
2011 2010
(a) C.I.F. Value of Imports
(i) Raw materials:
Steel and Non-Ferrous Material 109.27 34.17
Components 405.40 245.61
Sub-Total 514.67 279.78
(ii) Machinery Spares 6.83 5.14
(iii) Capital Goods 37.78 32.11
(iv) Stores, Tools, etc. 5.25 2.47
Total 564.53 319.50
Converted in equivalent USD million
at closing rate of 31 March 127 71
(b) Expenditure in foreign currencies:
(i) Travelling expenses 3.71 4.00
(ii) Royalty, net of tax 2.36 3.75
(iii) Technical Consultancy, net of tax 5.29 6.81
(iv) Interest 1.38 0.55
(v) Research and Development Expenses 0.45 0.12
(vi) Consultancy charges 1.93 2.30
(vi) Advertisement & publicity 26.21 6.92
(vii) Other matters 28.56 34.92
(viii) Capital Expenditure at overseas offices - -
(ix) Investment in shares of PT Bajaj Auto Indonesia - 81.14
(x) Investment in shares of BAIH BV. 210.08 1.60
(c) Earnings in foreign currencies:
(i) F.O.B. Value of exports (USD 974.6 million; 4,551.75 3,245.75
Previous Year: USD 681.7 million)
(ii) F.O.B. Value of exports-goods traded in - 0.07
(USD Nil; Previous Year: USD 13,946/-)
(iii) Forwarding charges exports recovered 8.77 17.97
(iv) Interest 1.40 3.33
(v) Royalty 0.59 0.74
(vi) Technical Know how - -
(vii) Asset disposal 0.12 -
(viii) Others 2.15 1.09
(d) Exchange differences on account of
fluctuations in foreign currency rates Exchange
difference gains/(loss) recognised in the Profit
and Loss account.
(i) Relating to Exports during the year as 112.74 21.20
a part of 'Sales'
(ii) On settlement of Export receivables
carried forward from the previous
accounting period as a part of: 'Other Income' (2.25) 0.49
(iii) On settlement of other transactions as a
part of : 'Other Income/other expenses' 2.87 2.19
(iv) Gain/(Loss) on Cancellation of Forward
Contracts as a part of 'Other Income/other expenses' - -
(v) On realignment of open forward contracts
against exports of the year - 4.36
(vi) On realignment of open forward contracts
against future exports - -
(vii) Marked to Market Gain/(Loss)(net) on change
in value of derivative hedging Instruments - 21.80
(e) Foreign exchange derivatives and exposures outstanding at close of the
year:
(Disclosed in equivalent US Dollars for sake of brevity, uniformity and
comparability).
Nature of Instrument Aggregate amount in Purpose
US Dollars (Million) Hedging/
As at As at Speculation
31 March, 31 March
2011 2010
(I) Foreign Exchange Derivatives:
(a) Forward contracts:
Forward purchase 32 Nil Hedging
Forward sale Nil 168 Hedging
Par forward sale 240 117 Hedging
Option sale-Range Forward 852 462 Hedging
1,124 747
(II) Open Foreign Exchange Exposures
(a) Payables 49 36
(b) Others 33 20
6. Managerial Remuneration:
(a) Computation of Net Profits in accordance
with Section 198(1) and Section 349 of Companies
Act, 1956
(i) Profit as per Profit and loss Account 3,339.73
Add: Managing Directors' Remuneration
(including perquisites) 6.94
Wholetime Directors' Remuneration
(including perquisites) 14.70
Commission to Non-Executive Directors 0.75
Provision for tax 1,011.02
1,033.41
Less: Excess of Sales price over cost of assets sold 2.10
Provision for doubtful debts and advances written back 2.22
Provisions no longer required 46.03
50.35
Profit on which commission is payable 4,322.79
(ii) Commission to Chairman-Shri Rahul Bajaj
Commission payable as determined by the Board
of Directors to be limited to an amount equal to
thrice the annual salary for the year 4.50
(iii) Commission to Wholetime Director-
Shri Madhur Bajaj Commission payable as determined
by the Board of Directors to be limited to an amount
equal to thrice the annual salary for the year 3.42
(iv) Commission to Managing Director- Shri Rajiv
Bajaj Commission payable as determined by the
Board of Directors to be limited to an amount
equal to thrice the annual salary for the year 3.96
(v) Commission to Executive Director-Shri Sanjiv
Bajaj Commission payable as determined by the Board
of Directors to be limited to an amount equal to
thrice the annual salary for the year 0.72
(vi) Commission to Non-Executive Directors
Commission @ 1% on Rs. 4,322.79 crore 43.23
Commission payable as determined by
the Board of Directors 0.75
(b) The Profit & Loss Account includes payments and provisions on account
of remuneration to the Managing Director and Wholetime Directors as under:
(Rs. In Crore)
Managing Director Whole Time Directors
2011 2010 2011(a) 2010
(i) Salary 1.32 0.72 2.88 2.25
(ii) Commission 3.96 2.16 8.64 6.75
(iii) Privilege Leave Entitlement 0.32 0.09 0.45 0.20
(iv) Contribution to Provident 0.47 0.25 1.02 0.80
Fund, Superannuation & Gratuity
(v) Other perquisites 0.20 0.05 0.51 0.13
(vi) Estimated monetary value
of perquisite in form of:
Unfurnished Accommodation 0.57 0.12 0.92 0.83
Free use of Company's car 0.10 0.10 0.07 0.07
Furniture at Residence - - 0.21 0.18
6.94 3.49 14.70 11.21
(a) Mr. Sanjiv Bajaj, an Executive Director of the company is also the
Managing Director of Bajaj Finserv Limited.
His remuneration as an Executive Director from this company and as a
Managing Director from Bajaj Finserv Limited, both together, are subject to
the higher of the maximum admissable limits of any one of the two
companies.
7. Details of raw materials consumption, goods traded in and Machinery
Spares Consumption:
2011 2010
Unit Qty Rs. In Qty Rs. In
Crore Crore
(i) Raw materials
(including
components)
consumed:
(a) Ferrous Metal M.T. 18,879 82.36 16,464 61.87
Sq.Ft
Mtrs. - - 617
Nos.
(b) Non-Ferrous Metal M.T. 620 4.77 915 8.04
Mtrs.
Nos.
(c) Tyres & tubes Nos. 16,506,019 514.28 11,964,101 296.15
(d) Other Components 10,653.20 7,294.21
(e) Others 57.28 39.84
Total 11,311.22 7,700.11
(ii) Imported and indigenous raw material consumption (including
components):
Rs. In Percentage Rs. In Percentage
Crore Crore
(a) Imported (including 459.60 4.1 277.09 3.6
Customs Duty and other
related charges)
(b) Indigenous 10,852.29 95.9 7,423.02 96.2
Total 11,311.22 100.0 7,700.11 100.2
(iii) Imported and
indigenous Machinery
Spares Consumed:
(a) Imported (including
Customs Duty and other
related charges) 7.36 17.9 0.17 0.8
(b) Indigenous 33.70 82.1 21.14 99.2
Total 41.06 100.0 21.31 100.2
(iv) Details of goods traded in-Purchases:
Numbers Rs. In Numbers Rs. In
Crore Crore
Auto Spare Parts 568.41 419.76
Engineering Products,
for export - 0.05
Total 568.41 419.81
8. Details of Licensed & Installed Capacity, Production, Stocks and
Turnover Class of Goods:
2011 2010
Numbers Rs. In Numbers Rs. In
Crore Crore
(I) Motorised Two Wheelers &
Three Wheelers upto 350cc
Engine capacity
(i) Licensed Capacity
(including two Wheelers
c.k.d packs- 200,000 Nos.)(a) 1,639,350 1,639,350
(ii) Installed Capacity (b) 5,040,000 4,260,000
(iii) Production 3,844,438 2,864,519
(iv) Stocks:
At commencement:
Two & Three-Wheelers 53,925 159.65 43,329 128.61
Goods Traded in: Two Wheelers
Auto Spare Parts 70.32 72.76
Engineering Products,
for export
Total 229.22 201.37
At Close:
Two & Three-Wheelers 74,386 230.27 53,925 159.65
Goods Traded in:
Two Wheelers
(Rs.-Previous year Rs. Nil)
Auto Spare Parts 87.32 70.32
Engineering Products,
for export
Total 317.22 229.22
(v) Turnover
Two & Three-Wheelers 3,823,954 15,784.62 2,852,580 11,280.18
Goods Traded in:
Two Wheelers
Auto Spare Parts
(including factory
made parts) 1,146.91 837.84
Engineering Products,
for export - 0.06
Total 16,931.22 12,118.22
(vi) Other:
Scrapped due to accident/
Fire (insurance claim
received) 22 1,344
Free of charge 1 -
Return of previous
year's free of charge - 1
(vii) Details of c.k.d.
packs included in above
Stocks at commencement 13,454 4,796
Production 616,350 478,047
Turnover:
Export 603,888 469,389
Stocks at Close 25,916 13,454
(II) Special Purpose
Machine Tools:
(i) Licensed Capacity (a) 80 80
(ii) Installed Capacity (b) 80 80
(iii) Production 36 3
(iv) Capitalised 36 3
(a) Licensed Capacity is stated as per the Original Licence held by the
erstwhile Bajaj Auto Ltd. (pre-demerger). However, the Company's products
are exempt from Licensing requirements under New Industrial Policy in terms
of notification no. s.o. 477 (E) dated 25 July 1991.
(b) As certified by the COO and being a technical matter, accepted by the
Auditors as correct.
9. Sales tax deferral incentive/loan, to the extent eligible under Rule 84
of the Maharashtra Value Added Tax Rules, 2005, has been prepaid during the
year at a discounted value of Rs. 368.14 crore thereby resulting in a
surplus of Rs. 826.82 crore. The said sum has been reflected as an
exceptional item in the Profit & Loss Account and considered as a capital
receipt.
10. Derivative financial instruments:
The Company has adopted the accounting treatment and disclosures in
accordance with the principles laid down in AS 30 and AS 32 on foreign
currency derivative contracts.
The Company holds foreign currency derivative to hedge its foreign currency
exposure. Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently re-measured at
their fair value. The Company designates certain foreign currency
derivatives as hedges of foreign currency risk associated with a highly
probable forecast transaction (cash flow hedge).
The company has entered into simple forward contracts and par forward
contracts to hedge highly probable forecast export transactions. These
instruments meet the management's Foreign exchange risk management
objectives and also qualify for hedge accounting as per the principles of
hedge accounting.
The company has also entered into range forward contracts to hedge highly
probable forecast transactions, where the export realisations of the
company are protected below a minimum pre-determined foreign exchange rate
whereas the realisation advantages are available to the company there from
up to a higher pre-determined foreign exchange rate. The company does not
benefit by rupee depreciating beyond the pre-determined foreign exchange
rate. Though these instruments meet the management's Foreign exchange risk
management objectives, they do not qualify for hedge accounting as the same
do not satisfy test of effectiveness. The market value of instruments
outstanding at the close of the year indicate a gain aggregating Rs. 116.46
crore (previous year aggregating Rs. 76.08 crore), which as a matter of
prudence has not been recognised.
Cash flow hedges:
Changes in the fair value of a derivative hedging instrument that qualify
for hedge accounting as per the principles of hedge accounting and
designated as a cash flow hedge are recognised as Hedging Reserve and
presented within Reserves and Surplus, to the extent that the hedge is
effective. To the extent that the hedge is ineffective, changes in fair
value if resulted in loss are recognised in profit and loss account.
However, changes in fair value in respect of ineffective hedges resulting
in gains are not recognised on the basis of prudence. If the hedging
instrument no longer meets the criteria for hedge accounting, expires or is
sold, terminated or exercised, then hedge accounting is discontinued
prospectively. The cumulative gain or loss previously recognised in Hedging
Reserve, remains there until the forecast transaction occurs.
When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time is recognised in profit and loss account.
When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in Hedging Reserve is immediately
transferred to profit and loss account.
Risk management policy and other disclosures:
The Exports of BAL, presently constituting substantial portion of the
turnover, are at prices predetermined for each product in each region.
These prices are fixed in USD based on an assumed USD/INR rate. (Budgeted
rate of realisation). Exports are then effected at such price and hence it
is desirable for the company to shield itself from adverse movements in
forex rates at a future date.
The Company also imports raw materials and components for its Motorcycles
etc. However, the value of such imports is not material as compared to the
value of exports. Nevertheless, the company may wish to secure its
procurement prices in terms of INR to be able to forecast its pricing and
profitability. Consequently the company may wish to hedge such exposures,
future and current, to achieve the aforesaid objective.
The exchange rate between the Indian rupee and foreign currencies has
changed substantially in recent periods and may continue to fluctuate
substantially in the future. Consequently, the Company uses derivative
financial instruments, such as foreign exchange forward and option
contracts, to mitigate the risk of changes in foreign currency exchange
rates in respect of its forecasted cash flows and trade receivables.
The details in respect of the outstanding foreign exchange forward
contracts including Range Forward and Par Forward contracts are given
below. The forward exchange contracts mature between one to twelve months.
The table below summarizes the notional amounts (amounts of contracts
booked and outstanding) of foreign currency forward contracts into relevant
maturity groupings based on the remaining period as at the March 31, 2011:
Export Transactions:
2011 2010
Notional MTM in INR Notional MTM in INR
USD Mn Gain/(Loss) USD Mn Gain/(Loss)
(Sell) (Rs. In (Sell) (Rs. In
Crore) Crore)
Not later than 3 months
(April 11 to June 11) 276 55.43 202.50 76.72
Later than three months and
not later than six months
(July 11 to Sept 11) 276 40.12 190.50 44.48
Later than six months and
not later than one year
(Oct 11 to Marc h 12) 540 41.72 354 (7.37)
Total 1094 537.24 744 113.84
Import Transactions:
2011 2010
Notional MTM in INR Notional MTM in INR
USD Mn Gain/(Loss) USD Mn Gain/(Loss)
(Buy) (Rs. In (Buy) (Rs. In
Crore) Crore)
Not later than 3 months
(April 11 to June 11) 2 (0.04) Nil Nil
Later than three months and
not later than six months
(July 11 to Sept 11) Nil Nil Nil Nil
Later than six months and
not later than one year
(Oct 11 to March 12) Nil Nil Nil Nil
Total 4 (0.04) Nil Nil
The fair values (Marked-to-market) of foreign currency derivative contracts
outstanding as on March 31, 2011 and March 31, 2010 are as follows:
Export Transactions:
2011 2010
Notional MTM in INR Notional MTM in INR
USD Mn Gain/(Loss) USD Mn Gain/(Loss)
(Sell) (Rs. In (Sell) (Rs. In
Crore) Crore)
Foreign currency derivative
designated as hedging
instruments
(Simple forward and Par
forward contracts) 240 20.81 262.50 33.39
Foreign currency derivative
not designated as hedging
instrum ents (Range
forward contracts) 852 116.46 462 76.08
Total 1092 137.27 724.50 109.47
Import Transactions:
2011 2010
Notional MTM in INR Notional MTM in INR
USD Mn Gain/(Loss) USD Mn Gain/(Loss)
(Buy) (Rs. In (Buy) (Rs. In
Crore) Crore)
Foreign currency derivative
designated as hedging
instruments
(Simple forward contracts) 2 (0.04) Nil Nil
Total 2 (0.04) Nil Nil
The fair value of forwards and foreign currency option contracts is
determined based on the appropriate valuation techniques as given by the
banks.
The cash flows from the hedges are expected to occur over the financial
year 2011-12 and will accordingly flow to the profit and loss account.
In respect of foreign currency derivative contracts designated as cash flow
hedges, the Company has recorded a net gain of Rs. 20.77 crore and net gain
of Rs. 33.39 crore, as a component of equity (Hegde Reserve) as at March
31, 2011, and 2010, respectively and a net gain of Rs. 32.02 crore and a
net gain of Rs. Nil as part of revenue during the year ended March 31,
2011, and 2010 respectively.
The movement of Hedging reserve is as follows:
(Rs. In Crore)
2011 2010
Opening Balance 33.39 Nil
Add : Net gain recognised on cash flow hedges 19.40 Nil
Less: Net gain reclassified to profit or loss 32.00 Nil
Closing Balance 20.77 33.39
There is no forecast transaction for which hedge accounting had previously
been used, but which is no longer expected to occur.
Amount that was removed from appropriate equity account (Hedging Reserve
Account) during the period and included in the initial cost or other
carrying amount of a non-financial asset or non-financial liability whose
acquisition or incurrence was a hedged highly probable forecast transaction
is Rs. Nil.
Amount in respect of the ineffectiveness recognised in the statement of
profit and loss that arises from cash flow hedges are Rs. Nil.
In respect of the Company's foreign currency par forward contracts
outstanding as on March 31,2011, a 10% increase/decrease in the exchange
rates of the currency underlying such contracts as given by the banks would
have resulted in an approximately Rs. 106.77 crore increase/decrease in the
Company's hedging reserve.
Counter-Party Risk:
Counter-party risk encompasses settlement risk on foreign currency
derivative contracts. Exposure to these risks is closely monitored and kept
within predetermined parameters. The Company does not expect any losses
from non-performance by these counter-parties.
The Company's policy is to transact with credit worthy banks, which are
reviewed on an on-going basis. The following table depicts that the
majority of the foreign currency derivatives are placed in highly rated
banks:
Investment grade of Outstanding Foreign Exchange Forward:
USD Million
2011
Contracts
Highest safety 606
High safety 486
Adequate safety -
Total 1094
Highest Safety represents a credit rating equivalent of AAA, High Safety
represents a credit rating equivalent of AA+,AA and Adequate Safety
represents a credit rating of A.
11. Investments:
a. Investments made by the Company other than those with a maturity of less
than one year and those intended to be held for less than one year, being
of long-term nature, diminution in the value of quoted investments are not
considered to be of a permanent nature. On an assessment of non-performing
investments (quoted and unquoted) as per guidelines adopted by the
management, no provision has been determined during the year ended 31 March
2011.
b. PT. Bajaj Auto Indonesia (PT. BAI), a subsidiary of the company, in
which the company holds 98.94%, has registered substantial accumulated
losses. The company through PT. BAI made a foray into the Indonesian
market, which is very competitive but promising. Considering the challenges
in setting up an appropriate dealer and service network, creation of brand
awareness, appropriate tie ups with finance agencies, understanding
customer behavior and preferences, in addition to setting up an assembly
plant, the gestation period is expected to be long but eventually
profitable. However, considering the continuing losses and longer gestation
period, the company has assessed the carrying value of investments made in
PT. BAI and determined an amount of Rs. 102.27 crore at present, as a
diminution in the value of investment and has accordingly made a provision
of the said amount.
12. a. Movement in provisions for warranty:
(Rs. In Crore)
Particulars 2011 2010
Opening balance 30.89 23.20
Add: Provision for the year 29.32 28.97
Less: Payment made during the year 21.19 21.28
Less: Released during the year - -
Closing balance 39.02 30.89
12. b. Liability for employee benefits has been determined by an actuary,
appointed for the purpose, in conformity with the principles set out in the
accounting standard 15 (Revised) the details of which are as hereunder.
Funded Scheme:
(Rs. In Crore)
Particulars 2011 2010
Amount To Be Recognised in Balance Sheet Gratuity Gratuity
Present Value of Funded Obligations 160.23 122.44
Fair Value of Plan Assets (61.40) (37.40)
Net Liability 98.83 85.04
Amounts in Balance Sheet
Liability 98.83 85.04
Assets - -
Net Liability 98.83 85.04
Expense To Be Recognised in the
Statement of P & L
Current Service Cost 6.68 4.97
Interest on Defined Benefit Obligation 10.09 6.69
Expected Return on Plan Assets (2.71) (2.01)
Net Actuarial Losses/(Gains) Recognised in Year 23.53 17.21
Total, Included in 'Employee Benefit Expense' 37.59 26.86
Actual Return on Plan Assets 3.74 2.64
(Rs. In Crore)
Particulars 2011 2010
Reconciliation of Benefit Obligations &
Plan Assets For the Period:
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 122.44 95.92
Current Service Cost 6.68 4.97
Interest Cost 10.09 6.69
Actuarial Losses/(Gain) 24.56 17.84
Benefits Paid (3.54) (2.98)
Closing Defined Benefit Obligation 160.23 122.44
Change in Fair Value of Assets
Opening Fair Value of Plan Assets 37.40 28.13
Expected Return on Plan Assets 2.71 2.01
Actuarial Gain/(Losses) 1.03 0.62
Contributions by Employer 23.80 9.62
Benefits Paid (3.54) (2.98)
Closing Fair Value of Plan Assets 61.40 37.40
Assets information 2011 2011 2010
Insurer Managed Funds 61.40 100.00% 100.00%
Experience Adjustments:
Year ended 31 March
2007 2008 2009 2010 2011
Defined Benefit Obligation 87.29 100.63 95.92 122.44 160.23
Plan Assets 52.12 56.91 28.13 37.40 61.40
Surplus/(Deficit) (35.17) (43.72) (67.79) (85.04) (98.83)
Exp. Adj. on Plan Liabilities 2.74 8.98 6.52 3.30 26.09
Exp. Adj. on Plan Assets 0.03 0.52 (2.75) 0.63 1.03
Principal Actuarial Assumptions (Expressed as Weighted Averages):
2011 2010
Discount Rate (p.a.) 8.30% 8.20%
Expected Rate of Return on Assets (p.a.) 7.50% 7.50%
Salary Escalation Rate (p.a.) - Senior Staff 8.00% 8.00%
Salary Escalation Rate (p.a.) - Junior Staff 9.00% 9.00%
Unfunded Schemes:
Particulars 2011 2010
Compensated Welfare Compensated Welfare
Absences Scheme Absences Scheme
Present Value of
Unfunded Obligations 37.77 4.74 36.57 4.25
Expense recognised in
the Statement of P & L 10.53 0.60 11.57 (0.28)
Discount Rate (p.a.) 8.30% 8.30% 8.20% 8.20%
Salary Escalation
Rate (p.a.) - Senior Staff 8.00% 8.00%
Salary Escalation Rate
(p.a.) - Junior Staff 9.00% 9.00%
13. Deferred Tax adjustments recognised in the financial statements are as
under:
(Rs. In Crore)
Particular Balance Arising during Balance
carried as at the year ended carried as at
31 March 2010 31 March 2011 31 March 2011
Deferred Tax Liabilities:
On account of timing
difference in:
a) Depreciation
and Amortisation 191.81 5.89 197.70
Total 191.81 5.89 197.70
Deferred Tax Assets:
On account of timing
difference in:
a) Voluntary Retirement
Scheme costs 111.53 (29.12) 82.41
b) Inventory Valuation (Section
145A of the Income Tax Act, 1956) 16.11 6.91 23.02
c) Provision for bad and
doubtful debts, DEPB, ICDs etc. 3.25 (0.68) 2.57
d) Provision for privilege
leave etc. 15.99 0.01 16.00
e) Taxes, duties etc. 12.16 (0.28) 11.88
f) Amortisation of premium/
discount on acquisition
of fixed income securities (3.45) 2.56 (0.89)
g) Adjustments on account of
gratuity provisions 28.25 3.82 32.07
h) Transitional provision for
diminution in value of investments 6.28 (5.35) 0.93
Total 190.12 (22.13) 167.99
Net 1.69 28.02 29.71
14. Balances with Non-scheduled foreign banks (Current Accounts):
(Rs. In Crore)
Name of Bank Country Balance as at 31 March Maximum Balance
outstanding during
the year
2011 2010 2011 2010
Standard
Chartered Bank Sri Lanka 0.12 0.02 0.13 0.03
Standard Dubai 0.03 0.08 0.17 0.23
Chartered Bank
HSBC Bank Mexico 0.04 0.06 0.22 0.21
Total 0.19 0.16
15. Deposits include a sum of Rs. 9.2 crore (Previous year Rs. 9.2 crore)
against use of premises on a Leave and License basis, placed with Directors
and their relatives, jointly and severally.
16. Future minimum lease rental in respect of assets:
(i) given on operating lease in the form of office premises after April 1,
2001
Minimum future lease payments as on March 31, 2011:
(a) Receivable within one year - Rs. 2.63 crore (Rs. 0.49 crore)
(b) Receivable between one year and five years - Rs. 9.90 crore (Rs. 1.31
crore)
(c) Receivable after five years -Rs. 0.14 crore (Rs. 0.16 crore)
(ii) Taken on operating lease in the form of office premises after April 1,
2001 Minimum future lease payments as on March 31, 2011:
(a) Payable within one year- Rs. 7.25 crore (Rs. 6.83 crore)
(b) Payable between one year and five years- Rs. 17.43 crore (Rs. 17.31
crore)
(c) Payable after five years - Rs. 17.74 crore (Rs. 19.51 crore)
17. The company has allotted bonus shares on 13 September 2010 in the ratio
of one equity share for every equity share of Rs. 10 each held in the
company on the record date. The Basic and Diluted Earnings Per Share (EPS)
has been calculated for the current year and previous year after taking
into account the bonus issue as required by AS-20 'Earnings Per Share'.
18. Segment Information based on the Consolidated Financial Statements
attached to the Independent Financial Statements has been disclosed in the
Statement annexed to this Schedule.
19. Disclosure of transactions with Related Parties, as required by
Accounting Standard 18 'Related Party Disclosures' has been set out in a
separate statement annexed to this Schedule. Related parties as defined
under clause 3 of the Accounting Standard have been identified based on
representations made by key managerial personnel and information available
with the Company.
20. Considering the company has been extended credit period upto 45 days by
its vendors and payments being released on a timely basis, there is no
liability towards interest on delayed payments under 'The Micro, Small and
Medium Enterprises Development Act 2006' during the year. There is also no
amount of outstanding interest in this regard, brought forward from
previous years.
The above information is on basis of intimation received, on requests made
by the company, with regards to vendors registration under the said Act.
21. Amounts less than Rs. 50,000 have been shown at actual against
respective line items statutorily required to be disclosed.
22. Previous year figures have been regrouped, wherever necessary, to make
them comparable with those of the current year.
As per our attached report of even date
For and on behalf of Dalal and Shah
Firm Registration Number: 102021W
Chartered Accountants
Anish P. Amin
Partner
Membership Number: 40451
J. Sridhar
Company Secretary
Rahul Bajaj Chairman
Madhur Bajaj Vice Chairman
Rajiv Bajaj Managing Director
Sanjiv Bajaj Executive Director
D.S. Mehta }
Kantikumar R. Podar }
Shekhar Bajaj }
D.J. Balaji Rao }
S.H. Khan } Directors
Suman Kirloskar }
Naresh Chandra }
Nanoo Pamnani }
Manish Kejriwal }
P. Murari }
Niraj Bajaj }
Place: Pune
Date : 18th May, 2011.
Statement of Significant Accounting Policies:
1) System of Accounting:
i) The Company follows the mercantile system of accounting and recognises
income and expenditure on an accrual basis except in case of significant
uncertainties.
ii) Financial Statements are prepared under the Historical cost convention.
These costs are not adjusted to reflect the impact of changing value in the
purchasing power of money.
iii) Estimates and Assumptions used in the preparation of the financial
statements are based upon management's evaluation of the relevant facts and
circumstances as of the date of the Financial Statements, which may differ
from the actual results at a subsequent date.
2) Revenue recognition:
a) Sales:
i) Domestic Sales are accounted for on dispatch from the point of sale.
ii) Export sales are recognised on the date of the Mate's Receipt/shipped
on board and initially recorded at the relevant exchange rates prevailing
on the date of the transaction.
b) Export Incentives:
Export incentives are accounted for on Export of Goods if the entitlements
can be estimated with reasonable accuracy and conditions precedent to claim
is fulfilled.
c) Income:
The Company recognises income on accrual basis. However, where the ultimate
collection of the same lacks reasonable certainty, revenue recognition is
postponed to the extent of uncertainty.
(1) Interest income is accrued over the period of the loan/investment and
net of amortisation of premium/discount with respect to fixed income
securities, thereby recognising the implicit yield to maturity, with
reference to coupon dates. However, income is accrued only where interest
is serviced regularly and is not in arrears, as per the guidelines framed
by the management.
(2) Dividend is accrued in the year in which it is declared whereby a right
to receive is established.
(3) Profit/loss on sale of investments is recognised on the contract date.
(4) Benefit on account of entitlement to import goods free of duty under
the 'Duty Entitlement Pass Book Scheme' is accounted in the year of export
if the same can be measured with reasonable accuracy.
3) Fixed Assets and Depreciation:
(A) Fixed Assets:
Fixed Assets except freehold land are carried at cost of acquisition,
construction or at manufacturing cost, as the case may be, less accumulated
depreciation and amortisation.
(B) Depreciation and Amortisation:
(a) Leasehold land:
Premium on leasehold land is amortised over the period of lease.
(b) On Plant & Machinery given on Lease:
Depreciation on Plant & Machinery and Dies and Moulds given on lease is
being provided at the rates worked out on Straight Line Method over the
primary period of lease as stated in the Lease Agreement or at the rates
specified in Schedule XIV to the Companies Act, 1956 whichever is higher,
on pro-rata basis with reference to the month of commencement of lease
period. These dies have been fully written off.
(c) On Pressure Die Casting (PDC) Dies:
Depreciation on certain PDC Dies is provided over the estimated economic
life of the dies or at the rates specified in Schedule XIV to the Companies
Act, 1956, whichever is higher, proportionate from the month they are put
to use.
(d) On other Fixed Assets:
Depreciation on all assets is provided on 'Straight Line basis' in
accordance with the provisions of Section 205(2)(b) of the Companies Act
1956, in the manner and at the rates specified in Schedule XIV to the said
Act.
i. Depreciation on additions is being provided on prorata basis from the
month of such additions.
ii. Depreciation on assets sold, discarded or demolished during the year is
being provided at their rates upto the month in which such assets are sold,
discarded or demolished.
4) Intangible Assets:
a) Technical know-how acquired:
Expenditure on technical know-how acquired (including Income-tax and R& D
cess) is being amortised equally over a period of six years.
b) Technical know-how developed by the company:
i) Expenditure incurred on know-how developed by the company, post research
stage, is recognised as an intangible asset, if and only if the future
economic benefits attributable are probable to flow to the company and the
costs can be measured reliably.
ii) The cost of Technical Know-how developed is amortised equally over its
estimated life i.e. generally three years.
5) Investments:
a) Fixed income securities remaining with the company on vesting of the
manufacturing undertaking of erstwhile Bajaj Auto Limited, are carried at
their fair market values as at 1 April 2007 where the carrying costs of
such investments were higher on that date, less amortisation of
premium/discount thereafter, as the case may be.
b) Other Fixed income securities are carried at cost, less amortisation of
premium/discount, as the case may be, and provision for diminution, if any,
as considered necessary.
c) Investments other than fixed income securities are valued at cost of
acquisition, less provision for diminution as necessary.
d) Investments made by the Company are, generally, of a long-term nature,
hence diminutions in value of quoted and unquoted investments are not
considered to be of a permanent nature. However, current investments,
representing fixed income securities with a maturity less than 1 year and
investment not intended to be held for a period more than 1 year, are
stated at lower of cost or fair value.
e) The management has laid out guidelines for the purpose of assessing
likely impairments in investments and for making provisions based on given
criteria. Appropriate provisions are accordingly made, which in the opinion
of the management are considered adequate.
6) Inventories:
Cost of inventories have been computed to include all costs of purchases,
cost of conversion and other costs incurred in bringing the inventories to
their present location and condition.
a) Finished stocks, Auto spare parts and Work-in-progress are valued at
cost or net realisable value whichever is lower. Finished stocks lying in
the factory premises, Branches, Depots are valued inclusive of excise duty.
b) Stores and Tools are valued at cost arrived at on weighted average basis
However, obsolete and slow moving items are valued at cost or estimated
realisable value whichever is lower.
c) Raw materials and components are valued at cost arrived at on weighted
average basis or lower of cost and net realisable value, as circumstances
demand. However, obsolete and slow moving items are valued at cost or
estimated realisable value whichever is lower.
d) Machinery spares and Maintenance materials are charged out as expense in
the year of purchase. However, Machinery spares forming key components
specific to a machinery and held as insurance spares are capitalized along
with the cost of the Asset.
e) Goods in transit are stated at actual cost incurred upto the date of
Balance Sheet.
7) Foreign Currency Transactions:
a) Current Assets and Liabilities in foreign currency outstanding at the
close of financial year are revalorised at the appropriate exchange rates
prevailing at the close of the year.
b) The gain or loss on decrease/increase in reporting currency due to
fluctuations in foreign exchange rates, in case of current assets and
liabilities in foreign currency, are recognised in the profit and loss
account in the manner detailed in note 5 (d) in Schedule 14 to the
accounts.
c) Fixed Assets purchased at Overseas Branches in foreign exchange are
recorded at their historical cost computed with reference to the average
rate of foreign exchange remitted to the Branch.
d) Foreign Exchange Contracts/Derivatives:
i) Profits and losses arising from either cancellation or utilization of
contracts are recognised in the profit and loss account as detailed in note
5 (d) in Schedule 14 to the accounts.
ii) Losses & gains of outstanding foreign exchange contracts/derivatives to
hedge highly probable forecast transactions,
if determined effective, as per the principles of hedge accounting,
recognised in the 'Hedge Reserve' and to ultimately flow into the profit
and loss account when the underlying transactions occur. Losses on
ineffective hedging instruments are recognised in the profit and loss
account. Refer note 10 Schedule 14 to the accounts.
8) Research & Development Expenditure:
Research & Development Expenditure is charged to revenue under the natural
heads of account in the year in which it is incurred. Payments for R&D work
by contracted agency are being expensed out upto the stage of completion.
However, expenditure incurred at development phase, where it is reasonably
certain that outcome of research will be commercially exploited to yield
economic benefits to the company, is considered as an Intangible asset and
accounted in the manner specified in clause 4b) above.
9) Employee Benefits:
a) Privilege Leave entitlements:
Privilege leave entitlements are recognised as a liability, in the calendar
year of rendering of service, as per the rules of the company. As
accumulated leave can be availed and/or encashed at any time during the
tenure of employment the liability is recognised at the actuarially
determined value by an Appointed Actuary.
b) Gratuity:
Payment for present liability of future payment of gratuity is being made
to approved Gratuity Fund, which fully covers the same under Cash
Accumulation Policy of the Life Insurance Corporation of India. However,
any deficit in Plan Assets managed by LIC as compared to the actuarial
liability, determined by an appointed actuary, is recognised as a liability
immediately.
c) Superannuation:
Defined Contribution to Superannuation fund is being made as per the Scheme
of the Company.
d) Provident Fund Contributions are made to Company's Provident Fund Trust.
Deficits, if any, of the fund as compared to aggregate liability is
additionally contributed by the company and recognised as an expense.
e) Defined Contribution to Employees Pension Scheme 1995 is made to
Government Provident Fund Authority.
10) Tax:
a) Provision for Tax is made for the current accounting period (reporting
period) on the basis of the taxable profits computed in accordance with the
Income Tax Act, 1961.
b) Deferred Tax resulting from timing difference between book profits and
taxable profits are accounted for to the extent deferred tax assets and
liabilities are expected to crystalise with reasonable certainty. However,
deferred tax assets, representing unabsorbed depreciation or carried
forward losses, are recognised, if and only if there is virtual certainty
that there would be adequate future taxable income against which such
deferred tax assets can be realised. Deferred tax is recognised on
adjustments to revenue reserves to the extent the adjustments are allowable
as deductions in determination of taxable income and they would reverse out
in future periods.
11) Provisions and Contingent Liabilities:
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation. A disclosure
for a contingent liability is made when there is a possible obligation or a
present obligation that may, but probably will not, require an outflow of
resources. When there is a possible obligation or a present obligation in
respect of which the likelihood of outflow of resources is remote, no
provision or disclosure is made.
Disclosure of Transactions with Related Parties as required by the
Accounting Standard-18:
(Rs. In Crore)
Name of related party and A B C D
Nature of relationship &
Nature of transaction
A. Holding company,
subsidiaries and
fellow subsidiary:
PT. Bajaj Auto
Indonesia
(98.94% shares held
by Bajaj Auto Ltd.)
& Contribution to Equity
[291,875 shares of USD 100 each - 137.82 81.14 137.82
(Previous year 291,875 equity
shares of USD 100 each)]
Sale of Spare Parts & Vehicles SKD 85.95 24.82 33.80 2.35
Interest received 0.89 - 2.91 -
Warranty paid 0.63 - 0.60 -
Advertisement expenses paid 8.89 - - -
Bajaj Auto International
Holdings B V
Amsterdam Netherlands
(Fully owned subsidiary)
& Contribution to Equity
& Share Premium 210.08 918.72 1.60 708.64
(2,000 shares of Euro 100 each)
B. Associates, joint ventures
and investing parties:
Bajaj Holdings &
Investment Ltd*
Purchase of
[91,119,000 shares of Rs. 10 each - (91.12) 1.16 (45.56)
shares by BHIL
(Investing party-holds 31.49%
shares of Bajaj Auto Ltd.)
(Previous year 45,559,500
shares of Rs. 10 each)]
* During the year, 45,559,000
shares were allotted
as bonus shares &
Dividend paid 182.24 - 97.68 -
Business Support Service received 1.11 - 0.50 -
Business Support Service rendered 0.33 - 0.16 -
Aviation Charges received 0.07 - - -
Sale of 8.01% debentures of
Ultra Tech Cement Ltd 5.03 - - -
Sale of Certificate of Deposit
of State Bank of Bikaner & Jaipur 23.66 - - -
C. Individuals controlling
voting power/exercising significant
influence and their Relatives:
Rahul Bajaj (Chairman) &
Remuneration 3.31 - 2.51 -
(Also Key management
personnel) & Commission 4.50 (4.50) 3.60 (3.60)
Rent paid for premises 0.03 - 0.03 -
Deposit paid against premises
taken on lease - 0.90 - 0.90
Madhur Bajaj (Vice Chairman) &
Remuneration 2.39 - 1.64 -
(Also Key management personnel) &
Commission 3.42 (3.42) 2.52 (2.52)
Rent paid for premises 0.03 - 0.03 -
Deposit paid against
premises taken on lease - 0.88 - 0.88
Rajiv Bajaj (Managing
Director) & Remuneration 2.98 - 1.33 -
(Also Key management
personnel) & Commission 3.96 (3.96) 2.16 (2.16)
Rent paid for premises 1.23 - 0.33 -
Deposit paid against
premises taken on lease - 2.10 1.20 2.10
Sanjiv Bajaj (Executive
Director) & Remuneration 0.36 - 0.31 -
(Also Key management
personnel) & Commission 0.72 (0.72) 0.63 (0.63)
Shekhar Bajaj & Sitting fees 0.01 - 0.01 -
Commission 0.05 (0.05) 0.03 (0.03)
Rent paid for premises 0.06 - 0.05 -
Deposit paid against premises
taken on lease - 1.76 - 1.76
Niraj Bajaj & Sitting Fees 0.01 - 0.01 -
Commission 0.05 (0.05) 0.03 0.03
Services Rendered 0.35 - - -
D. Key Management Personnel & their
Relatives:Included in 'C' above
E. Enterprises over which anyone
in (c) & (d) exercises
significant influence:
Bajaj Finserv Ltd. & Purchase
of windpower 18.22 - 29.57 -
Business Support
Service received 0.19 - 0.08 -
Business Support
Service rendered 1.51 - 0.50 -
Aviation Charges received 1.92 - 1.38 -
Purchase of 6.20% bonds
of IDBI Ltd - - 10.10 -
Purchase of 7.45% bonds of
LIC Housing Finance Ltd - - 6.19 -
Purchase of 11.45% bonds of Rural
Electrification Corporation Ltd - - 5.36 -
Purchase of 8.01% debentures
of Samruddhi Cement Ltd 9.96 - - -
Purchase of 8.80% bonds of Power
Grid Corporation Ltd 21.91 - - -
Purchase of 9.50%
bonds of NABARD 27.74 - - -
Purchase of 7.99% NCDs of
LIC Housing Finance Ltd 25.76 - - -
Purchase of 8.90% bonds of Power
Finance Corporation Ltd 15.86 - - -
Purchase of 8.95% bonds of Power
Finance Corporation Ltd 10.56 - - -
Purchase of 11.25% bonds of Power
Finance Corporation Ltd 12.29 - - -
Purchase of 8.45% bonds of Rural
Electrification Corporation Ltd 26.11 - - -
Purchase of 8.50% bonds of Power
Finance Corporation Ltd 5.31 - - -
Sale of Certificate of Deposit
of State Bank of Bikaner & Jaipur 23.66 - - -
Bajaj Finance Ltd. & Subvention
Charges Paid 5.78 - 5.34 -
Subvention Bad debts Sharing - - 18.81 -
Services Rendered 8.43 0.26 7.23 1.38
Services Received 0.25 - - -
Other Debits 0.33 - 0.19 -
Other Credits 0.13 - 0.18 -
Repayment of inter
corporate deposits/loan - - 14.60 -
Interest on loan - - 0.22 -
Bajaj Allianz General Insurance
Co. Ltd. & Insurance Premiums Paid 8.87 2.12 8.71 2.52
Claims Received 3.33 - 5.32 -
Services Rendered 0.20 - - -
Sale of investments 4.94 - - -
Bajaj Allianz Life Insurance
Co. Ltd. & Insurance Premiums Paid 0.15 - 0.02 -
Purchase of investments 120.98 - - -
Sale of investments 9.86 - - -
Bajaj Financial
Solutions Ltd. & Other debits 0.11 - 0.05 -
Bajaj Electricals Ltd. & Rent Paid 0.01 - 0.01 -
Purchases 0.53 (0.10) - -
Sale of DEPB 1.23 - 1.93 -
Hind Musafir Agency Ltd. &
Services received 9.64 (0.30) 7.34 (0.12)
Advance paid - 0.55 0.96 0.96
Hindustan Housing Co. Ltd. &
Maintenance charges paid 0.31 (0.06) 0.31 -
KTM Sportsmotorcycles AG & Sale of
material for joint development project 6.34 5.17 0.45 (0.06)
Purchase of Accessories 0.12 - - -
Services rendered 0.28 - 0.25 -
Mukand Ltd. & Purchases 0.01 - - -
A = 2011 - Transaction Value
B = 2011 - Outstanding amounts carried in the Balance Sheet
C = 2010 - Transaction value
D = 2010 - Outstanding amounts carried in the Balance Sheet
Name of the related party and nature of the related party relationship
where control exists have been disclosed irrespective of whether or not
there have been transactions between the related parties. In other cases,
disclosure has been made only when there have been transactions with those
parties.
Segment wise Revenue, Results and Capital employed for the year ended 31
March 2011:
(Rs. In Crore)
(a) Primary Segment: Automotive Investments Consolidated
Business Segment:
Revenue
External Sales and Other Income 16,642.24 365.81 17,008.05
Inter segment Sales and Other Income -
Total Revenue 16,442.24 365.81 17,008.04
Segment Result 4,100.66 365.81 4,466.47
Interest Expense 2.39 - 2.39
Income Taxes 1,009.29
Net Profit 4,498.27 365.81 3,454.79
Segment Assets 4,869.05 4,243.68 9,112.73
Unallocated
Corporate Assets 1.95
Total Assets 4,469.05 4,243.68 9,114.68
Segment Liabilities 2,798.78 - 2,798.78
Unallocated Corporate 1,348.27
Liabilities
Total Liabilities 2,498.78 - 4,147.05
Capital Employed 2,070.27 4,243.68 4,967.63
Capital Expenditure 179.79 179.79
Depreciation and write downs 123.89 123.89
Non Cash Expenses other
than Depreciation 2.79 2.79
Business segments of the consolidated group have been identified as
distinguishable components that are engaged in a group of related product
or services and that are subject to risks and returns different from other
business segments. Accordingly Automotive and Investments have been
identified as the business segments.
(b) Secondary Segment: Geographic Segment:
(Rs. In Crore)
India Rest of Consolidated
the world
Segment revenue:
External Sales and Other Income 12,422.10 4,585.95 17,008.05
Segment assets 8,239.88 874.80 9,114.68
Capital expenditure 178.71 1.08 179.79
(a) Primary Segment : Business Segment
(Rs. In Crore)
Automotive Investments Consolidated
Revenue
External Sales and Other Income 11,974.15 122.50 12,096.65
Capital expenditure 178.71 1.08 179.79
Inter segment Sales
and Other Income -
Total Revenue 11,274.12 222.50 12,096.65
Segment Result 2,185.54 122.50 2,308.04
Interest Expense 6.75 - 6.75
Income Taxes 703.45
Net Profit 2,278.79 222.50 1,297.84
Segment Assets 3,727.29 3,176.06 6,903.35
Unallocated Corporate Assets 7.02
Total Assets 3,227.29 3,276.06 6,910.37
Segment Liabilities 2,224.74 - 2,224.74
Unallocated Corporate
Liabilities 674.85
Total Liabilities 2,224.74 - 2,899.59
Capital Employed 1,502.55 3,176.06 4,010.78
Capital Expenditure 97.57 97.57
Depreciation and write downs 137.41 137.41
Non Cash Expenses other
than Depreciation 16.92 16.92
Business segments of the consolidated group have been identified as
distinguishable components that are engaged in a group of related product
or services and that are subject to risks and returns different from other
business segments. Accordingly Automotive and Investments have been
identified as the business segments.
(b) Secondary Segment: Geographic Segment:
India Rest of Consolidated
the world
Segment revenue
External Sales and Other Income 8,794.75 3,301.90 12,096.65
Segment assets 6,276.35 634.02 6,910.37
Capital expenditure 97.21 0.36 97.57
As per our attached report of even date
For and on behalf of Dalal and Shah
Firm Registration Number: 102021W
Chartered Accountants
Anish P. Amin
Partner
Membership Number: 40451
J. Sridhar
Company Secretary
Rahul Bajaj Chairman
Madhur Bajaj Vice Chairman
Rajiv Bajaj Managing Director
Sanjiv Bajaj Executive Director
D.S. Mehta }
Kantikumar R. Podar }
Shekhar Bajaj }
D.J. Balaji Rao }
S.H. Khan } Directors
Suman Kirloskar }
Naresh Chandra }
Nanoo Pamnani }
Manish Kejriwal }
P. Murari }
Niraj Bajaj }
Place: Pune
Date : 18th May, 2011.
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