chairman’s message - escorts limited
TRANSCRIPT
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Chairman’s Message
Dear Shareholders,
We made steady progress in the year under review. What isheartening is the momentum gained during the end of the yearhas been sustained. All our core businesses, spearheadedby agri machinery, are in robust health, vindicating ourdecision to get out from the non-core businesses.
To give sharper focus to our agri machinery business,management thought it prudent to exit from the non-corebusiness of healthcare delivery. Though Escorts had beenrunning healthcare business efficiently and profitably, it wasfelt that for better future prospects, the company shouldconcentrate in the areas of agri machinery, constructionequipment and auto and railway ancillaries.
The Group’s strong brand equity in healthcare led to handsomereturns. Ploughing back this money in our core business hasgiven the much needed fillip to our tractor operations.
While the India economy is burgeoning, we, as pioneers of farm mechanization in the country, areconcerned over inadequate progress on the agriculture front. Despite speedy progress on the industrialfront and commendable performance of the service sector, agriculture sector’s progress has beenrather tardy.
India still lives in villages and more than 75% of our population still depends on agriculture for employment.Therefore, if prosperity has to percolate down and impact average Indian, it is imperative that agriculturesector receives the importance it deserves. The scenario is certainly changing but the shift has to bespeedier.
We see immense possibilities in the agriculture sector and hope the Government will soon take measuresto tackle the problems of low productivity, inadequate infrastructure, inadequate linkage with the industryand lack of market orientation. India has the potential of emerging as a major exporter of agri products.
With nearly two-thirds of Indian villages still without a tractor, the scope of farm mechanization isenormous. And we are well positioned to play a significant role in this area. Conservative estimatesenvisage a growth of 8 to 10% for the tractor industry in the years ahead.
After re-engineering of our manufacturing plants, bringing them to international standards and financialrestructuring, we have extended re-engineering into the indirect areas like manpower rationalization,productivity improvement and cost reduction. These should certainly provide us keener edge over thecompetition.
ESCORTS LIMITED
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With a complete range of tractors to cater to the domestic as well as overseas markets, we areconfident of making most of the growth the tractor industry is slated to experience in the years ahead.With the industry likely to cross an annual figure of 3 lacs by next year, we expect to significantlyincrease our production and notch a greater marker share. On the export front, we are equally optimisticlargely owing to growing acceptance of our tractors in the US, European and African markets. Onbalance, our tractor business is on a sound footing and the coming years should see Escorts furtherconsolidate its position on both domestic and overseas fronts.
Our second core business of construction and material handling equipment recorded 37% growth inturnover in 2004-05. With several new products in our portfolio and growing demand for materialhandling and road construction equipment, we are confident of further accelerating our growth in thisbusiness. Next three/four years should see Escorts emerge as a major player in crane and roadcompaction segments.
New initiatives taken in the area of auto suspension products have started yielding results. A new lineof products has been developed successfully for the European market and the company has alreadysecured a large chunk of business from OEMs. The Division has also made a deeper dent in the aftermarket segment. The company hopes to regain the ground it had lost in the past few years owing tofall in production volumes of its OEM customers in the country.
The railway equipment business had another good year during which the Division improved its turnover/profit ratio. With new products on the anvil and a second manufacturing facility to be commissionedsoon, the railway business is likely to grow substantially in the years ahead.
With the current year 2005—2006 showing signs of improvement and all the businesses in theacceleration mode, we are determined to turn around the operations this year itself. With wherewithalto excel on all parameters, we are very excited about the future, which is bright and belongs to us.
Our grateful thanks to you, dear shareholders, for reposing your trust in us. We have a clear agenda togrow shareholder value and do hope to measure up to their expectations in coming years.
My sincere thanks to our employees who have played a key role in the turnaround of the company, tothe members of the Board for their advice and guidance and other stakeholders for their cooperation.
RAJAN NANDA
Chairman and Managing Director
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BOARD OF DIRECTORS
Chairman & Managing Director
Mr. Rajan Nanda
Executive Director & COO
Mr. Nikhil Nanda
Directors
Dr. M.G.K. Menon
Dr. S.A. Dave
Dr. P.S. Pritam
Mr. S.C. Bhargava
Vice President - Law & Company Secretary
Mr. G.B. Mathur
Registered Office
11, Scindia House
Connaught Circus
New Delhi - 110 001
Corporate Centre
15/5 Mathura Road,
Faridabad - 121 003
Auditors
M/s. S.N. Dhawan & Co.
Bankers
Standard Chartered Bank
ABN Amro Bank
Bank of Baroda
Citibank N.A.
Deutsche Bank
Hongkong & Shanghai Banking Corporation Limited
HDFC Bank Limited
Punjab National Bank
State Bank of India
State Bank of Travancore
The United Western Bank Limited
CONTENTS
Ten Years’ Summary of Operations ...................... 4
Directors’ Report .................................................... 5
Auditors’ Report ...................................................... 27
Balance Sheet ......................................................... 30
Profit and Loss Account ......................................... 31
Schedules 1 to 19 forming part of the
Balance Sheet and Profit & Loss Account .............. 32
Cash Flow Statement .............................................. 64
Balance Sheet Abstract and Company’s
General Business Profile ......................................... 66
Consolidated Financial Statement .......................... 69
Statement Regarding
Subsidiary Companies
Pursuant to Section 212 of the
Companies Act, 1956 .............................................. 94
ESCORTS LIMITED
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RESULTS FOR THE YEAR 2004-05@ 2003-04@ 2002-03 2001-02 2000-01 1999-2000 1998-99 1997-98 1996-97 1995-96
Total Income **1860 1292 1124 1327 1579 1570 1320 1418 1657 1444Index 129 89 78 92 109 109 91 98 115 100
Cost of Sale 1680 *1593 1017 1256 1397 1375 1152 1210 1437 1258Index 134 127 81 100 111 109 92 96 114 100
Interest 149 121 85 66 61 53 58 44 53 47Index 317 257 180 141 130 113 123 94 113 100
Profit before Tax 31 (422) 22 5 121 142 110 164 167 139Index 23 (403) 16 4 87 102 79 118 120 100
Taxation 39 – 2 5 14 30 26 34 40 39Index 100 – 5 12 36 77 67 87 103 100
Deferred Taxation (47) (108) (4) (8) – – – – – –Index 617 1420 50 100 – – – – – –
Profit after Tax 39 (314) 24 8 107 112 84 130 127 100Index 39 (414) 24 8 107 112 84 130 127 100
Dividend – – 7 7 33 32 32 30 28 23Index – – 31 31 141 139 139 130 122 100
Dividend Tax – – 1 – 3 4 3 3 3 –Index – – 31 – 100 133 100 100 100 –
Profit/(Loss) 39 (314) 16 1 71 76 49 97 96 77Index 51 (507) 21 1 92 99 63 126 125 100
YEAR END POSITION
Fixed Assets :Gross Block 1009 1034 1012 963 952 845 740 665 678 715Less : Depreciation 493 447 386 332 290 245 205 170 163 100
: Provision for impairment – 6 5 5 – – – – – –
Net Block 516 581 621 626 662 600 535 495 516 615Index 84 94 101 102 108 97 87 80 84 100
Investments 497 613 619 517 548 475 487 381 261 190Index 262 323 326 272 289 250 256 201 137 100
Net Current Assets 176 247 548 529 392 610 531 564 504 425Index 41 58 129 124 92 144 125 133 119 100
Net Deferred Tax Assets/(Liability) 79 32 (77) (80) – – – – – –Index 198 139 95 100 – – – – – –
Share Capital 72 72 72 72 72 72 72 68 65 59Index 122 122 122 122 122 122 122 115 110 100
Reserves 546 521 844 835 950 911 857 811 732 646Index 85 81 131 129 147 141 133 126 113 100
Loans 668 894 816 719 618 743 651 582 495 445Index 150 201 183 161 139 167 146 131 111 100
@ The current and immediately preceding accounting periods are for 15 months whereas the other previous years are for 12 months.Therefore the figures of the current period are comparable with that of the immediate preceding previous period.
* Includes Loss on Sale/Provision for Diminution in the value of Investments, Loans to Telecom and Other Businesses amounting toRs. 185.02 crores.
** Includes profit on divestment of healthcare business amounting to Rs. 505.51 crores.
Ten Years’ Summary of Operations(Rs. Crores)
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DIRECTORS’ REPORT
Your Directors present the Sixtieth Annual Report of your Company together with the Audited Statements of Accounts for the period ended on
September 30, 2005.
FINANCIAL RESULTS
(Rs. Crores)
Period ended Period ended
30th September 2005 30th June, 2004
INCOME & PROFITS/(LOSS)
Sales & Business Income 1,307.93 1,120.81
Income from Investments 505.73 0.21
Profit/(Loss) before Interest, Depreciation &
Amortisation 477.78 (56.68)
Interest 141.79 101.66
Depreciation & Amortisation 61.95 68.34
Loss on Sale/Provision for Diminution in value Long
Term Investments & Loans to Group Companies 243.02 195.06
Profit/(Loss) before Tax 31.02 (421.74)
Profit/(Loss) after Tax 39.09 (313.54)
DIVIDENDS
Provision for Dividend — –
Dividend Tax — –
SHAREHOLDERS’ FUNDS
Share Capital 72.23 72.23
Reserves & Surplus 545.90 521.05
TOTAL 618.13 593.28
DIVIDEND
Due to operational losses incurred by the Company during the period, the Board of Directors have decided not to recommend anydividend for the period ended September 30, 2005.
SHARE CAPITAL
Your Company proposes to issue 36,11,610 Convertible Share Warrants to the promoters and/or person acting in concert, to partfinance its Working Capital needs, at a price to be determined in accordance with the Preferential Issue Guidelines issued bySecurities and Exchange Board of India (SEBI). The said Share Warrants shall be converted into equal number of Equity Shares onor before 18 months from the date of allotment. Consequent upon the conversion, the paid up capital of the Company shall standincreased to Rs. 75.84 crores.
ESCORTS LIMITED
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MANAGEMENT DISCUSSION AND ANALYSIS
1. AGRI MACHINERY BUSINESS
a) Industry Structure and Developments
After three years of decline, Tractor Industry grew by 11.5% in 2003-04 and 30.9% in 2004-05 to a level of 2.52 Lac tractors.The Indian Tractor industry had been growing at an average compounded annual growth rate of 8% over the last 3 decadesand it attained a peak of 2.70 Lacs tractors in 1999-2000. Since then, however, the industry showed a decline to a level of 1.72Lac tractors in the year 2002-03. The key factors that adversely influenced tractor demand was below-normal monsoons forthree years, i.e. from 2000-01 to 2002-03 and the high foodgrain stocks that led to market rates for crops being depressed, thusadversely affecting farmers’ incomes.
The growth of the industry over the last three decades resulted in entry of several new entrants including all the major tractormultinationals. Today, the industry consists of 14 manufacturers with an aggregate installed capacity of approx. 4.50 Lacstractors. The additional capacity created and the decline in industry volumes from 2.70 Lacs tractors to 1.72 Lacs tractors from2000-01 to 2002-03 resulted in below 50 percent utilisation of capacities leading to severe cutthroat competition.
The industry is segmented by Horse Power of which the 30-40 HP segment is the dominant one due to small and fragmentedland holdings. Geographically, Northern India (Punjab, Haryana, Uttar Pradesh and Rajasthan) accounts for about 50% of totaltractor sales. Our Company enjoys a relatively better market share in this geographical territory.
b) Performance
Despite the steep decline in the industry, Escorts consciously decided to aggressively reduce channel inventory further byapproximately 1100 units in 2004-05 in addition to approximately 12,000 units inventory reduction carried out in the previousyears. This no doubt impacted our revenue and profits adversely but has enabled the Company to optimize its working capitaland thus put us on a strong foundation for the future to be built upon.
During the period July 2004 to September 2005, Escorts wholesaled 32,557 tractors including export of 3,855 units.
c) Initiatives
Re-engineering: With a view to improving efficiencies and reducing cost, after re-engineering of the manufacturing plants andbringing them to international standards of quality, successful implementation of ERP “Oracle 11-I” suite and financial re-structuring, we extended our “Re-engineering” into the indirect areas such as further improvement in productivity, manpowerrationalisation, improvement in the processes and further reduction in costs.
Product Development: In its state of the art R&D Centre, the Company has maintained its focus on improvement ofprocesses as well as product development. The Company is one of the leading tractor manufacturers of the country andproduces tractors in the 27-75 HP range. Its tractors are marketed under three brand names, viz. ESCORT, POWERTRACand FARMTRAC. Escort brand of tractors are symbolic of reliability and trust and enjoy the confidence of the farmingcommunity for the last 40 years. These are economy range tractors available in different models ranging from 27-35 HP.Powertrac brand of tractors are one of the most fuel-efficient tractors in their respective categories that offer excellent value formoney and have helped the farmers improve their quality of life. Different models in this category are available from 20-55 HP.Farmtrac brand tractors are one of the most powerful premium range of tractors that give maximum productivity to the farmers.Models in this category are available in the range of 35-75 HP.
Spanning these three brands, the Company has a full range of tractors to cater to the domestic as well as overseas markets.Several new models like Farmtrac Champion, Farmtrac Hero and Escort 335 Josh are establishing themselves in themarketplace. Escort Jawan MPT, the first multipurpose tractor positioned by the company in the haulage and agriculturalsegment in the smaller HP range has evoked tremendous response in the market place. With the introduction of the newrevamped Powertrac DS series (Powertrac 434, Powertrac 439, Powertrac 445 and Powertrac 455) and with a dedicateddistribution system for marketing this range, the Company is bound to give a tough fight to the competitors in the marketplace.With the infusion of latest technology in the form of epicyclic transmissions, we shall work towards maintaining the premiumpositioning of Farmtrac range.
Our continued focus on product development has resulted in the widest range of tractors in the market catering to the needsof diverse segments of customers and applications. Today our world class manufacturing plants roll out quality products andour TS 16949 certification of quality management system is a vindication of our customer-oriented processes for developmentof quality.
Marketing: Several new initiatives have been adopted by the Company to increase market share. One of the biggestMarketing strengths is our widest distribution network in the country with more than 700 dealers & distributors, 2000 salesoutlets, 30 area offices and strong field force of 150 persons.
d) Industry Outlook
Compound growth rate of the Tractor industry has been 8% over the last three decades. Increasing recognition over the lastfew years to the importance of agricultural sector will the spur growth of this sector, which will give impetus to the continuedgrowth of tractor industry.
At the same time, increasing usage of tractors for haulage and the Government’s focus on infrastructure development shallalso give a boost to this industry. With exports also growing substantially, the industry is likely to cross an annual figure of 3Lacs by next year.
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The Company is fully geared to meet these challenges through continuous investment in product development, cost reductionas well as focused and aggressive marketing initiatives.
2. AUTO SUSPENSION PRODUCTS BUSINESS
Margins remained under pressure for the fifth year running and there was a significant fall in production volumes of our domesticOEM customers.
However, the aggressive market development programme initiated last year has been a huge success. The Division has developedover 20 products for the European market and secured big orders from prestigious OEMs.
Exports are likely to constitute over 20% of sales turnover in the current year. New export programmes are also underway andexport business should more than double within next two years.
The new business of sourcing and marketing a range of auto components in the After Market has also made good progress andsales turnover should soon cross Rs.20 Cr.
3. RAILWAY EQUIPMENT BUSINESS
The Division continued its good performance and further consolidated its position in the industry.
The Division is setting up a second manufacturing facility in Uttranchal to avail of the significant tax benefits. Commercial productionfrom this location should start within next 6 months.
Some of the long gestation new product programmes are on the verge of commercialisation and the Division should continue to growprofitably despite increasing competition in existing products.
4. FINANCIAL PERFORMANCE
The Company has suffered an operational cash loss of Rs. 169.74 crores as the Company could not participate in the growth oftractor industry mainly on account of liquidity problems faced by the Company resulting in lower production levels. Tractor industryregistered growth of 32% in the financial year 2004-05 over the financial year 2003-04. This operational loss has been more thancompensated by income from sale of investments of Rs. 505.73 crores as against loss on sale of investments of Rs. 185.02 croresrecorded in the previous period. In view of extra ordinary income from Healthcare divestment, the Company took this as anopportunity to provide for diminution in value of investments and its impaired assets to an extent of Rs. 243.02 crores.
Consequentially, the Company has recorded Profit before tax of Rs. 31.02 crores and Profit after tax of Rs. 39.09 crores in thecurrent period as compared to Loss before tax of Rs. 421.74 crores and Loss after tax of Rs. 313.54 crores during the previousperiod.
5. HUMAN RESOURCES/INDUSTRIAL RELATIONS
The Industrial relations with the workers and staff of the Company have remained cordial and peaceful during the period underreview. The Workers Union and workmen have exhibited maturity and understanding of the current financial position of the Companyand have agreed not to press for their charter of demands, till the financial situation of the Company improves.
6. RISKS & CONCERNS
The major risks associated with this industry are inadequacy of monsoons since more than 70% of sowing land is dependent onrainfall, non-availability of credit (almost 90% of tractor sales are funded by credit) and the policies of the Government with regard tothe agriculture sector. However, given the increasing recognition and contribution of the agriculture sector to the growth of Indianeconomy and the mere fact that the agriculture sector employs over 60% of the country’s population and accounts for almost aquarter of the GDP, a high growth in the agriculture sector is imperative to sustain the growth of Indian economy. Given all this, wedo not foresee any problems both with regard to credit availability and procurement policies of the Government in the near future.
7. OPPORTUNITIES AND THREATS
The growing domestic demand for food grains and agri products promises a very good future for Company’s core business. Webelieve that India can be a major exporter of grains and other Agri products and increased demand both Domestic and Exports willcall for increased yields, which besides other key inputs will result in increased Farm mechanization. Tractor density as well as theHP input per hectare is extremely low relative to international standards, tractor population today is concentrated in 10% of villagesand even today 70% of our villages do not have a tractor. CRISIL INFA has estimated a growth of 7.5%-8.5% CAGR for the next fiveyears. All this shows great potential for the growth in this industry.
8. DIVESTMENTS
In order to utilise its economic and managerial resources towards its core business, the Company took the initiative to liquidate thefollowing investment during the period ended 30th September, 2005.
Venture Type of Investment Shareholding (%) Value Realised
Escorts Heart Institute & Equity Shares 80 Rs. 520 croresResearch Centre Limited
ESCORTS LIMITED
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Your Company had entered into an agreement in September, 2005 with Fortis Healthcare Limited to divest its shares in EscortsHeart Institute & Research Centre Limited for a consideration of Rs. 520 crores. The sale proceeds have been received, exceptingfor Rs. 85.08 crores which has been retained in Escrow Account, awaiting fulfillment of certain conditions.
The Hon’ble Delhi High Court has ordered status quo in this matter. The Company has recognised the sale in these Accounts and hasalso obtained legal opinion, which has advised that there is no adverse effect on the sale transaction, in view of the High Court Order.
SUBSIDIARY COMPANIES :
ESCORTS TELECOMMUNICATIONS LIMITED
Your Company had entered into an agreement with Idea Cellular Limited to divest its share in ETL in January 2004. Requisite DOTapprovals for the sale are yet to be received, after obtaining which the transfer of shares will happen.
ESCORTS CONSTRUCTION EQUIPMENT LIMITED
Escorts Construction Equipment Limited (ECEL) has reported significantly improved performance in the FY 2004-05, by achieving agrowth of 37% in the turnover in FY 2004-05 over last fiscal year. During FY 2004-05, ECEL has reported a Profit After Tax (PAT) ofRs. 17.80 crores including Deferred Tax Savings of Rs. 13.10 crores. ECEL has been able to effectively consolidate on the turnaroundreported in the last fiscal year.
ECEL had introduced a number of “application specials” cranes during the year to take advantage of an increasing material handling andconstruction market. The Company also enhanced its manufacturing capacity to more than double, through associates’ actions.
Material handling equipment market has shown steady growth in the last fiscal as well. Road construction equipment segment has startedsigns of growth in the current fiscal year 2005-06 after remaining subdued for some period in the past. ECEL introduced a 12T VibratorySoil Compactor into the market, manufactured in collaboration with Hamm AG, Germany. This addition to its existing range of compactorswill ensure a growth for the company in the road segment also.
ECEL is expected to report sizably improved performance both in terms of top-line and bottom-line in the current FY 2005-06.
ESCOSOFT TECHNOLOGIES LIMITED
The Accounts of 31st March 2005 represent Operating Income without Animation and IFS business, since the same had been hived offinto separate Companies.
Your Company has been able to consolidate its Facilities Management Business by adding new orders from CBSE for result processingand Eli lily for payroll processing. This has opened up opportunities to the Company to qualify for getting orders from other Government/Non-Government educational Institutes.
The Company has MTEs which are Type Approved by the Telecom Authority. These are likely to be implemented in leading TelecomProjects for which Tenders have been bid along with reputed system integrators.
The wholly-owned subsidiary of your Company “Escotoonz Entertainment Pvt. Ltd.” which was earlier a division of Escosoft TechnologiesLtd., has successfully completed the Project “King - II” which was applauded in MIPCOM in France. The Company is currently engagedin another project named “Cyberdodo”. The Company has been able to get Venture Capital Fund of Rs. 2 crores from Rajasthan AssetManagement Co. Pvt. Ltd. during the Financial year under review. The Company is in advanced stage of negotiations with someInternational Clients for Animation serials/ films.
IFS SOLUTIONS INDIA PVT. LIMITED
The wholly-owned subsidiary of Escosoft Technologies Ltd., “IFS Solutions India Pvt. Ltd.” had bagged a large deal with HAL forimplementing its ERP package. This Company has been able to penetrate the domestic market successfully, despite stiff competition.
The Sales and income for the financial year under review were Rs. 76,539,510 as against Rs.46,933,222 for the previous financial yearregistering an increase of 63%.The profit before tax (after interest and depreciation charges) of Rs. 15,594,235 and the profit after tax ofRs. 7,873,697 for the financial year under review as against Rs. 760,533 and Rs. 4,393,881 respectively for the previous financial year,improved by 1950% and 79% respectively.
CELLNEXT SOLUTIONS LIMITED
The Total Sales income for the financial year under review were Rs.62,037,181 as against Rs.38,754,645 for the previous financial yearregistering an increase of 60%. The profit after tax in the current year is reported at Rs.3,580,268 for the financial year under review asagainst loss of Rs.38,299,706 in the previous financial year.
The Company is an established market leader in providing complete wireless IT & internet solutions and services to all leading telecomoperators and enterprises. Company’s core competence revolves around GSM & CDMA over data technologies like SMS, MMS, GPRS, IVRand development of wireless applications over the same.
CA ESCOSOFT
During the financial year under review there were no operations in the Company. Your Directors have decided to wind up the Companyin the coming year.
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ESCORTS ASSET MANAGEMENT LTD.
Escorts Asset Management Ltd. is the investment manager to Escorts Mutual Fund and is successfully managing eight schemescovering a broad spectrum of equity and debt segment as well as money market instruments. The schemes have provided excellentreturns to the unit holders during the year.
ESCORTS SECURITIES LTD.
Escorts Securities Limited is a SEBI registered intermediary in the capital and debt markets as a member of National Stock Exchange ofIndia Limited in the capital market as well as Futures and Options segments. Besides being Category I Merchant Banker it is also aDepository Participant with National Securities Depository Limited. The Company has also been granted license by SEBI for acting asPortfolio Manager. In order to extend its network, Escorts Securities Limited has opened many new branches during this period.
CONSOLIDATED FINANCIAL STATEMENTS
In compliance of clause 32 and clause 50 of the Listing Agreement with Stock Exchanges, the Company has prepared ConsolidatedFinancial Statements as per the Accounting Standards applicable to the Consolidated Financial Statements issued by Institute of CharteredAccountants of India. The Audited Consolidated Financial Statements along with the Auditor’s Report have been annexed with this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required under Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Reportof the Board of Directors) Rules, 1988 is given in Annexure – A and forms an integral part of this Report.
DIRECTORS
It is with deep sorrow that we report the sad demise of Dr. Fredie A. Mehta, eminent member of the Board of your Company. Dr. Mehtawas a distinguished professional, who had been with the House of Tata for several decades besides being on the Board of many renownedcompanies. He had also been consulted by Finance and Commerce Ministries on various fiscal and monetary policies of India.
The Board of your Company places on record its appreciation for the valuable contribution made by Dr. Mehta in the growth of theCompany during his tenure as Director.
During the period under review, Mr. Y. H. Malegam, Mr. Nimesh Kampani, Mr. J. S. Pathak, Mr. N. R. Krishnan, Mr. D. K. Mehrotra andMr. Anil Nanda ceased to be Directors of the Company. The Board places on record its appreciation of the valuable advice and counselrendered by them during their tenure as Directors.
Mr. Manoj Jain and Dr. N. K. Pandey were co-opted on the Board on 16th August, 2005 as Additional Directors. However, due to their pre-occupation in their respective profession they resigned from the Board of Directors on 2nd September, 2005 and 28th September, 2005,respectively.
Mr. Nikhil Nanda was appointed as Executive Director and Chief Operating Officer of the Company on 17th October, 2005 for the periodof five years.
Mr. S. C. Bhargava, Dr. P. S. Pritam, Dr. S. A. Dave and Dr. M. G. K. Menon were co-opted on the Board on 2nd September, 2005 asAdditional Directors. They hold office upto the ensuing Annual General Meeting. A notice under Section 257 of the Companies Act, 1956,proposing their candidature as Directors of your Company, have been received.
INVESTOR SERVICES
Your Company has set new standards in investor services and continues its quest for improvement. Some of the important initiativestaken by the Company are as follows:
(i) Investor Relation Centres at New Delhi and Mumbai, which provide effective personal interaction between investors and theCompany officials.
(ii) Investor friendly Website of the Company (www.escortsgroup.com) which gives most of the details and data frequently used byinvestors.
(iii) Dividend payment through Electronic Clearing System (ECS).
CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, a Report on Corporate Governance is enclosed as Annexure B.
A Certificate from Auditors confirming compliance of conditions of Corporate Governance is enclosed as Annexure C.
DIRECTORS’ RESPONSIBILITY STATEMENT
Directors’ Responsibility Statement under Section 217(2AA) of the Companies Act, 1956, forming part of this Report is given asAnnexure D.
ESCORTS LIMITED
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AUDITORS
M/s. S. N. Dhawan & Co., Chartered Accountants, retire as Auditors of the Company at the conclusion of the forthcoming Annual GeneralMeeting and being eligible, offer themselves for re-appointment. They have furnished a certificate to the effect that their re-appointment,if made, will be in accordance with Section 224 (1B) of the Companies Act, 1956.
COMMENTS ON AUDITORS’ REPORT
With reference to the comments given by the Auditors in the Auditor’s Report on Annual Accounts of the Company, the managementexplanations have been suitably made in the Notes to the Accounts given at Schedule 19 of the Balance Sheet and Profit & Loss Accountand are self explanatory. However, Management explanation to certain specific observations made by the Auditors and not explained inthe notes to accounts are as follows :
Para 5 (e) of Auditors’ Report : Shri Rajan Nanda, Chairman & Managing Director, is disqualified under the provisions of the Section274(1)(g) of the Companies Act, 1956 as the Company had defaulted in the redemption of 12% Secured Redeemable Convertibledebentures privately placed with ICICI Bank Limited. The said default has now been rectified.
Para vi(a) of Annexure to the Auditors’ Report : Due to the extraordinary losses faced by the Company in the previous financial year,the timely repayment of fixed deposits suffered. However, the fixed deposit repayment position has improved in the current financial yearand the Company is in the process of repaying the overdue amounts. The repayments of deposits is made to depositors with the interestupto the date of repayment and penal interest payable thereupon under the applicable rules.
Para vi(b) of Annexure to the Auditors’ Report : The Company has obtained order dated 25/8/2005 from the Ministry of CompanyAffairs, Government of India granting extension upto 30/09/2005 for complying with the provision pertaining to maintenance of liquid assetsunder Rule 3A Companies (Acceptance of Deposit) Rules, 1975 read with Section 58A of the Companies Act, 1956.
Para ix(a) and xi of Annexure to the Auditors’ Report : As explained above, due to extraordinary losses faced by the Company in theprevious financial year, there have been some delays in settling undisputed statutory dues and repayment of Debentures and loans.However, with improvements in the current financial year, the Company is in the process of negotiating and settling all these overdues.
AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
The exceptional circumstances in USA caused by devastating hurricanes prevented the timely completion and compilation of auditedaccounts of EAMI upto the date of Financial Statements. Therefore, in the preparation of the consolidated financial statements, theCompany could consider the audited financial statements of EAMI upto 31/12/2004 only.
As regards the unaudited Financial Statements of Escosoft and its subsidiaries, these companies are under liquidation under theapplicable laws of the country in which they were incorporated and there were no significant transactions in the period under review.However, these statements have been compiled and certified by the management in accordance with the applicable local laws.
PUBLIC DEPOSITS
7358 deposits aggregating to Rs.15.54 crores matured but remained unpaid (including claimed deposit) as on 30th September, 2005.Subsequently, out of the above, 2780 deposits of Rs.4.56 crores either have been repaid or renewed till 13th December, 2005.
PERSONNEL
Statutory statement of particulars of employees pursuant to Section 217 (2A) of the Companies Act, 1956 is given as Annexure E andforms an integral part of this Report.
EXTENSION OF FINANCIAL YEAR
The Company had extended its financial year by three months so as to end on 30th September, 2005. Hence, this financial year of theCompany was for 15 months (i.e. 1st July 2004 to 30th September, 2005), instead of 12 months.
ACKNOWLEDGEMENT
The Directors wish to thank the customers, dealers, bankers, financial institutions, the Central and State Governments for their continuedsupport. They also take this opportunity to record their appreciation of the contribution made by all the employees to the operations of theCompany during the period.
RAJAN NANDADate : January 20, 2006 Chairman & Managing Director
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Annexure – A to the Directors’ Report
I) CONSERVATION OF ENERGY
1. Energy Conservation Measures taken
● Maintained load power factor of 0.98 lag for HSEB (in 2004-05) from 0.95 four years back by continuous monitoring &improvements.
● Optimized running of compressors for compressed air conservation.
● Supply of compressed air at low pressure for maintenance requirements in night shifts and off days.
● Use of low intensity lighting for vigilance purpose during night shifts & off days.
● Coupling load bus bars to minimize transformer losses in B & C shift & holidays.
● Usage of Treated effluent water for horticulture requirements.
● Accountability & monitoring of Energy Consumption with each Production Unit which has resulted in avoiding losses.
● Utilization of Solar Water heating system for hot water requirements in Canteens.
● Minimize use of high cost self generation (D.G.Sets only during board power cuts).
2. Additional Investment & Proposals
● Modern Diesel Generator Set 2000kva with electronic injectors is planned to be installed which would generate power at10% lower cost to meet captive power requirements of CED based New Paint Line and other areas.
● Automatic power factor control systems with high capacity capacitors for further improvement of power factor.
● Introduce coil cooler in place of radiator for D.G. Set to increase the efficiency of D.G. Set.
● Increase usage of high lux low wattage tube lights in offices.
● Use of high frequency electronics ballast for tube lights in place of conventional ballast.
● Movement sensors for lights to be installed in daily meeting areas / conference rooms.
● Overhead Compressed Air Line network for Tractor mfg. plant for effective utilization of the compressor sources.
● Tighter maintenance of pneumatic tools to avoid leakages of compressed air.
3. Impact of the above measures on Energy Conservation and Cost of Production
● Reduced energy consumption per tractor by 8%.
● Obtained rebate of 3.5% in energy bills for maintaining high power factor.
● Reduction in fixed power consumption.
● Savings in water consumption by 15% over past three years.
4. Total Energy Consumption and Energy Consumption Per Unit
● Not Applicable
II) TECHNOLOGY ABSORPTION
1. RESEARCH & DEVELOPMENT
(a) Specific areas in which R&D was carried out by the Company in 2004-05
● Value Analysis Value Engg. & Standardization (VAVES Project).
● Upgradation of all domestic current engine models to meet Bharat Trem – 3 emission norms.
● Piston development – alternate source.
● Development of Delphi TVS Rotary pump for FT 60 AVL tractor.
● Development of Air-cleaner with PU foam filter elements.
● Transmission Power Losses.
● Smooth Gear Shifting - Less Effort.
● Adoption of New Clutches with advance technology.
● Oil Immerse Brake on FT series tractors.
● PT455 with Power Steering.
● Standardisation of Rear Hood.
ESCORTS LIMITED
12
(b) Benefits derived as a result of the above R&D
● Cost Saving achieved – Rs. 2900 / Tractor @ AMG.
● Met Emission Norms set by the Govt. Authorities.
● Alternate Source development.
● Improved Life & Serviceability.
● Reduction in Transmission Power Losses by 60%.
● Improvement in Gear Shifting by smoother and less shifting effort.
● Increase in Clutch Disc Life, Smoother Clutch engagement and disengagement and better damping of torsional
vibrations from engine to transmission.
● Longer Life of Brake discs
● Less Steering effort more comfortable
● Variety reduction
(c) Future Plan of Action
● Vineyard Special Tractor.
● Wiring Harness Standardization FT & PT.
● Cost Reduction Program 2005–06 – Rs. 2400/Tractor @ AMG.
● Development of New Engine Generation Family (NEGF) from 30HP to 100HP with Technical Assistance from
M/s. AVL Austria.
● Development of Engine for US EPA Tier – 3/EURO Stage 3 A emissions applicable from January 2008.
● Design and development of 4 cyl engine E4.286 NA.
● Design and development of 4 cyl engine E4.286 TC/TCI.
● Development of Engine Simulation software with Technical assistance From C-DAC, Pune.
● Development of Air-cleaner with PU foam filter elements.
● Side mounted Gear Shifting arrangement.
● Provision for Ground PTO on PT models.
● Low Revere speed on FT30/45 for puddling.
● Tandem Pump on FT tractors.
● PT Platform & Pedals on E Series.
● Fuel Tank Standardisation.
● Value Engg. of Platform & Pedals on PT & XL.
● Igus Bushes on FT Tractors.
● Design & Development of New Tractor with Epicyclic Reduction Rear Axle & Oil immersed Disc Brakes.
● Synchro Shuttle with 8+8.
● Synchro Shuttle with 12+12.
● Four Wheel Drive.
● Standardisation of 3-Point Linkages.
● Standardisation of Front Axle Arrangement.
● Standardisation of Throttle System.
● Standardisation of Radiator & Cowling.
● Front 3-Point Linkages.
13
(d) Expenditure on R & D
(Rs. Crores)
2004-05 2003-04
a) Capital Expenditure 0.06 0.55
b) Recurring Expenditure 14.76 15.34
Total 14.82 15.89
c) Total R & D Expenditure as a percentage of
- Gross Sales 1.13% 1.27%
- Net Sales 1.17% 1.45%
2. TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION
Efforts made towards technology absorption, adaptation and innovation
● Interaction with apex institutes and research and consulting organization both at national and international level.
● Tie-up with global leaders on specific projects.
Benefits derived as a result of the above efforts
● Interaction with apex institutes and research and consulting organization both at national and international level.
● Latest appropriate technology available leading to product improvement and reduced time.
● Improved reliability and new features.
● Product development for extended application.
3. PROPOSED & ACTUAL INVESTMENT FOR ENVIRONMENT PROTECTION
● Dust free environment provided for all assembly lines.
● Planned dust free air plant with spot cooling for New Paint Shop.
● Paint Shop setup provided with CED process, which is water based and environment friendly.
● Rainwater Harvesting done in segments in each of the plants has been effective. Planned in more areas in phases.
● Planned Noise Proofing of DG Sets rooms.
● Development of Green belt in and around the Plants.
● Effluent Treatment Plants in operation in all the Plants are well maintained.
● Member of Haryana Environment Mgmt. Society for development of site for disposal of hazardous waste.
III) FOREIGN EXCHANGE EARNINGS AND OUTGO
● Activities relating to exports etc.
Company has taken aggressive steps to increase its international presence by penetration in USA and Europe markets. Weare in the process of obtaining European Homologation for export models and thereby achieve international competitive edge.Company is determined to increase its export sales from 3855 tractors in Financial Period 2004-05 (15 months period) to 6800tractors in Financial Year 2005-06.
● Total Foreign exchange used and earned
(Rs. Crores)
2004-05 2003-04
a) Foreign Exchange used:
Imports (including capital goods) 27.36 51.95
Dividends remitted 0.00 0.02
Others 10.93 8.14
Total 38.29 60.11
b) Foreign Exchange earned 140.49 117.99
ESCORTS LIMITED
14
Annexure - B to the Directors’ Report
REPORT ON CORPORATE GOVERNANCE
I. Company’s Philosophy on Corporate Governance
Company’s Philosophy on Corporate Governance is aimed at achieving the balance between Stakeholder’s interest and corporate
goals through the efficient conduct of its business and meeting their obligations in a manner that’s guided by transparency,
accountability and integrity. Adequate financial reporting and disclosures are corner stones of good Corporate Governance. It has
always been believed that an independent Board following international practices, transparent disclosures and empowerment of
shareholders are as necessary as solid financial results for creating and sustaining shareholders value. Accordingly, the following
information is provided for the information of Stakeholders and public at large.
II. Board of Directors
The Board of Directors of the Company comprises of eminent personalities, who have made a mark in their respective fields. Majority
of the Directors are independent and non-executive. The following table summarizes the status of each Director, meetings attended
by them and other relevant particulars:
CURRENT DIRECTORS
Sr. Name Designation Category No. of Board Whether No. of No. of CommitteeNo. Meetings attended Directorships Memberships/
attended during the last in Public (Chairmanships)2004-05 AGM Companies * in Public
Companies**
1. Mr. Rajan Nanda Chairman & Executive & 8 Yes 7 2 (2)Managing Director non-independent
(Promoter)
2. Mr. Nikhil Nanda Executive Director Executive & 6 Yes 13 7 (4)& Chief Operating non-independentOfficer (Promoter)
3. Dr. P. S. Pritam Director Non-executive & independent 8 Yes 1 3
4. Dr. M. G. K. Menon Director Non-executive & independent 7 Yes 2 3 (3)
5. Dr. S. A. Dave Director Non-executive & independent 1 No 8 10 (1)
6. Mr. S. C. Bhargava Director Non-executive & independent 0 N.A. 10 1
* Including Escorts Limited.
** For this purpose only Audit Committees, Remuneration Committees and Investors’ Grievance Committees are considered (including in Escorts Ltd.).
NOTE : 1) None of the Directors is representing a Lender or Equity Investor.
2) None of the Non-Executive Directors hold substantial shareholding in the Company.
ERSTWHILE DIRECTORS
Sr. Name Designation Category No. of Board Whether Date of cessationNo. Meetings attended
attended during the last2004-05 AGM
1. Mr. Anil Nanda Vice Chairman Executive & Non-independent 0 No 31st March, 2005
(Promoter)
2. Dr. Fredie A. Mehta Director Non-executive & independent 0 No 19th June, 2005
3. Mr. Y. H. Malegam Director Non-executive & independent 2 No 12th July, 2005
4. Mr. Nimesh Kampani Director Non-executive & independent 2 Yes 16th August, 2005
5. Mr. Jai S. Pathak Director Non-executive & independent 2 Yes 8th July, 2005
6. Mr. N. R. Krishnan Director Non-executive & independent
(represented UTI as equity investor) 1 No 1st December, 2004
7. Mr. D. K. Mehrotra Director Non-executive & independent
(represented LIC as equity investor) 1 No 16th August, 2005
8. Mr. Manoj Jain Director Non-executive & independent 0 N.A. 2nd September, 2005
9. Dr. N. K. Pandey Director Non-executive & independent 2 N.A. 28th September, 2005
15
During the 15 months period ended 30th September, 2005, Eight (8) Board Meetings were held on following dates :
21st September, 2004,
1st December, 2004,
17th February, 2005,
31st March, 2005,
8th July, 2005, (earlier slated for 29th June, 2005 and adjourned)
16th August, 2005,
2nd September, 2005, and
28th September, 2005.
III. Audit Committee
● Constitution
The Audit Committee comprises of 3 non-executive and independent Directors :
1. Dr. M. G. K. Menon – Chairman
2. Dr. S. A. Dave
3. Dr. P. S. Pritam
The Committee is chaired by Dr. M. G. K. Menon who is an internationally reputed Scientist and has been awarded the PadmaShri, the Padma Bhushan and the Padma Vibhushan. He is ex-Minister for Science and Technology, Government of India.
Mr. G.B Mathur, Vice President - Law & Company Secretary is acting as Secretary of the Audit Committee.
● Terms of Reference
The charter of the Committee is as prescribed under Clause 49 of the listing agreement viz.:
1. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that thefinancial statement is correct, sufficient and credible.
2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of thestatutory auditors and the fixation of audit fees.
3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, withparticular reference to:
a. Matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s report interms of Clause (2AA) of Section 217 of the Companies Act, 1956.
b. Changes, if any, in accounting policies and practices and reasons for the same.
c. Major accounting entries involving estimates based on the exercise of judgment by the management.
d. Significant adjustments made in the financial statements arising out of audit findings.
e. Compliance with listing and other legal requirements relating to financial statements.
f. Disclosure of any related party transactions.
g. Qualifications in the draft audit report.
h. Safeguarding of assets and adequacy of provisions for all liabilities.
5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval.
6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal controlsystems.
7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffingand seniority of the official heading the department, reporting structure coverage and frequency of internal audit.
8. Discussion with internal auditors any significant findings and followup thereon.
ESCORTS LIMITED
16
9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud orirregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.
10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-auditdiscussion to ascertain any area of concern.
11. Looking into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (incase of non payment of declared dividends) and creditors.
12. Carrying out any other function as may be referred by the Board from time to time.
● Meetings & Attendance
During the 15 months period ended 30th September, 2005, the Committee met on 8 occasions. The following table summarizesthe date of each meeting and meetings attended by the members:
29.07.04 02.11.04* 15.12.04 28.01.05 16.02.05 27.04.05 12.05.05 05.08.05**
Dr. M. G. K. Menon Attended Attended Attended Attended Attended Attended Attended Attended
Dr. S. A. Dave Attended Attended Attended Attended Attended Not Attended Attended Not Attended
Dr. P. S. Pritam Attended Attended Attended Attended Attended Attended Attended Attended
* Adjourned from 29.10.2004** Adjourned from 29.07.2005
The Committee, in its meeting held on 16th February, 2005 reviewed the Annual Accounts for the period ended 30th June, 2004.
IV. Remuneration Committee
● Constitution
The Remuneration Committee comprises of 3 non-executive and independent Directors :
1. Dr. M. G. K. Menon – Chairman
2. Dr. P. S. Pritam (w.e.f. 02.09.2005)
3. Dr. S. A. Dave (w.e.f. 02.09.2005)
Late Dr. Fredie A. Mehta and Mr. Jai S. Pathak were members of the Committee upto 19th June, 2005 and 8th July, 2005respectively.
● Terms of Reference
The Remuneration Committee has been constituted to recommend and review the remuneration packages of the ManagerialPersonnels and to formulate a broad policy framework for managerial remuneration.
● Meetings & Attendance
During the 15 months period ended 30th September, 2005, there was no occasion for which the Remuneration Committee wasrequired to meet.
● Remuneration Policy
The Remuneration Policy as outlined by the Committee aims at:
● Recognising and rewarding performance and achievements
● Motivating and inducing the concerned executives to put in their best.
This policy is in tune with current national and international practices considering the highly competitive business scenario.
Attended by
Date of Meeting
17
● Details of Remuneration of Directors
The details of the remuneration paid to the Directors, during the 15 months period ended 30th September, 2005 are as follows:-
(Amount in Rs.)
Name Basic Perquisites Commission Contribution Sitting Stock Totalto PF/ fees option
other Funds
CURRENT DIRECTORS
*Mr. Rajan Nanda(drawn salary till31st March, 2005) 18,00,000 – – 6,93,749 – – 24,93,749
**Mr. Nikhil Nanda(drawn salary till30th April, 2005) 20,00,000 – – 7,47,749 – – 27,47,749
Dr. M. G. K. Menon – – – – 1,87,000 – 1,87,000
Dr. P. S. Pritam – – – – 1,03,000 – 1,03,000
Dr. S. A. Dave – – – – 46,000 – 46,000
Mr. S. C. Bhargava – – – – – – –
ERSTWHILE DIRECTORS
Mr. Y. H. Malegam – – – – 10,000 – 10,000
Mr. Nimesh Kampani – – – – 10,000 – 10,000
Mr. Jai S. Pathak – – – – 10,000 – 10,000
Dr. N. K. Pandey – – – – 10,000 – 10,000
Mr. N. R. Krishnan – – – – 5,000 – 5,000
Mr. D. K. Mehrotra – – – – 5,000 – 5,000
Mr. Anil Nanda – – – – – – –
Dr. Fredie A. Mehta – – – – – – –
Mr. Manoj Jain – – – – – – –
TOTAL 38,00,000 – – 14,41,498 3,86,000 – 56,27,498
* The appointment of Mr. Rajan Nanda, Managing Director, was contractual for a period of five years with effect from 3rd April, 2000,however, the Shareholders vide their resolution dated 25th October, 2004 passed through Postal Ballot, re-appointed Mr. RajanNanda, Managing Director for a further period of five years w.e.f. 1st April, 2005.
** The appointment of Mr. Nikhil Nanda, Executive Director was contractual for a period of five years with effect from 1st May, 2000.The Shareholders vide their resolution dated 25th October, 2004 passed through Postal Ballot, re-appointed Mr. Nikhil Nanda,Executive Director for the further period of five years w.e.f. 1st May, 2005. However due to his involvement in other importantprojects, he resigned from the position of Executive Director. Subsequently, Director felt that his continuation in the Board is must inthe current scenario of the Company and accordingly decided to appoint him as Executive Director and Chief Operating Officer.Consequent to this the Shareholders vide their resolution dated 10th November, 2005 passed through Postal Ballot appointedMr. Nikhil Nanda as Executive Director and Chief Operating Officer (COO) for a period of five years w.e.f. 17th October, 2005.
NOTE : The services of Managing Director and Executive Director & COO may be terminated by giving six calendar months’ notice.In the event of termination of appointment, they will be entitled to receive compensation in accordance with the provisions of Section
318 of the Companies Act, 1956.
ESCORTS LIMITED
18
V. Investors’ Grievance Committee
● Constitution:
The Investors’ Grievance Committee comprises of 3 non-executive independent Directors:
1. Dr. M. G. K. Menon – Chairman
2. Dr. S. A. Dave
3. Dr. P. S. Pritam
● Terms of Reference
The Committee looks into redressing of investors complaints like delay in transfer of shares, non-receipt of declared dividends,non-receipt of Annual Reports etc.
The Committee also oversees the performance of in-house Share Registry and recommends measures for overall improvementin the quality and promptness in investor services.
● Meetings & Attendance
During the 15 months period ended 30th September, 2005, the Committee met once. The following table summarizes the dateof meeting and attendance of the members:
28.01.2005
Dr. M. G. K. Menon Attended
Dr. S. A. Dave Attended
Dr. P. S. Pritam Attended
● Compliance Officer
Mr. G. B. Mathur, Vice President – Law & Company Secretary is the Compliance Officer.
● Complaints received / resolved
During the period under review, 27 complaints were received from investors which were replied / resolved to the satisfactionof investors.
● Pending Share Transfers
None of the requests for transfer and / or dematerialisation were pending for approval as on 30th September, 2005.
VI. General Body Meetings
Details of last three Annual General Meetings of the Company :
Year Date Time Place No. of Special Resolutionspassed at each AGM
2002 27th September, 2002 10.30 a.m. Sapru House, NoneBarakhamba Road,New Delhi – 110 001
2003 19th December, 2003 10.30 a.m. Sapru House, TwoBarakhamba Road,New Delhi – 110 001
2004 31st March, 2005 11.30 a.m. FICCI Golden Jubilee NoneAuditorium, Tansen Marg,New Delhi – 110 001
Attended by
Date of Meeting
19
I. IN THE 15 MONTHS PERIOD ENDED 30TH SEPTEMBER, 2005
● Approval of minimum remuneration payable to Mr. Rajan Nanda, 2,47,19,494 1,50,449
Managing Director in case of inadequacy or absence of profits in any
Financial Year during the period 1st April, 2005 to 31st March, 2008.
● Approval of minimum remuneration payable to Mr. Nikhil Nanda, 2,47,08,238 1,61,505
Executive Director in case of inadequacy or absence of profits in any
Financial Year during the period 1st May, 2005 to 30th April, 2008.
● Investment in Unsecured Subordinated Bonds carrying zero percent 2,46,48,964 2,21,373
interest of the aggregated value of Rs. 175.74 Crores of Idea Mobile
Communications Limited.
● Acquisition of 24,50,000 Equity Shares of Rs. 10 each of Escorts 2,47,17,122 1,53,070
Motors Ltd., for a sum not exceeding Rs. 83 crores.
● Authorizing the Board/its Committee thereof to offer, issue and allot 3,88,68,877 64,399
the securities of the Company.
The Postal Ballot exercise was conducted by Mr. M.L. Pahwa, retired Deputy Excise & Taxation Commissioner, Haryana, asscrutinizer. The above said resolutions were declared to have been passed as Special Resolution in the Annual GeneralMeeting of the Company held on 31st March, 2005.
II. IN THE CURRENT FINANCIAL YEAR 2005-2006
● Appointment of Mr. Nikhil Nanda as Executive Director & Chief Operating 2,57,68,093 91,275
Officer of the Company for a period of 5 years with effect from 17th
October, 2005 on the terms and conditions as set out in the resolution.
The Postal Ballot exercise was conducted by Mr. M.L. Pahwa, retired Deputy Excise & Taxation Commissioner, Haryana, asScrutinizer.
VII. Disclosures
a. Disclosure on materially significant related party transactions i.e. transactions of the Company of material nature, with itspromoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with theinterests of the Company at large.
None of the transactions with any of the related parties were in conflict with the interest of the Company.
b. Details of non-compliance by the Company, penalties, strictures imposed on the Company by Stock Exchanges or SEBI or anystatutory authority, on any matter related to capital markets, during the last three years.
None
VIII. Means of Communication
● Quarterly Results released during the 15 months period ended 30th September, 2005
The Company has published its Quarterly Financial results in the following national newspapers:
For Quarter ended 30.09.04 : Jansatta (Hindi), Financial Express (English)For Quarter ended 31.12.04 : Jansatta (Hindi), Financial Express (English)For Quarter ended 31.03.05 : Jansatta (Hindi), Financial Express (English)For Quarter ended 30.06.05 : Jansatta (Hindi), Financial Express (English)For Quarter ended 30.09.05 : Jansatta (Hindi),,Financial Express (English)
The Quarterly Results were displayed on Company’s website viz. www.escortsgroup.com in accordance with the requirementof Listing Agreement. The website also displays official news releases.
● Whether presentations were made to institutional investors or to the analysts?
No presentations were made to institutional investors.
● Management Discussion and Analysis ReportThe Management Discussion and Analysis Report is included in the Directors’ Report and forms part of the Annual Report.
Postal Ballot
The Company has passed the following Special Resolutions through Postal Ballot :
Details of Voting Pattern
Particulars of Special Resolutions Votes casted Votes castedin favour against
ESCORTS LIMITED
20
IX. General Shareholder Information
� Annual General Meeting
Date : 31st March, 2006
Time : 11.00 a.m.
Venue : FICCI Golden Jubilee Auditorium,Tansen Marg, New Delhi - 110 001.
� Appointment / Re-appointment of Directors:
At the ensuing Annual General Meeting, Dr. S. A. Dave, Dr. M. G. K. Menon, Dr. P. S. Pritam and Mr. S. C. Bhargava, presentlyAdditional Directors, are proposed to be appointed as Directors of the Company.
The information / details to be provided for the aforesaid Directors are as under:
Name Qualification Brief Resume and Area Other Committeeof Expertise Directorships Memberships
Dr. S. A. Dave M.A.(Economics),Ph.D.
Dr. Dave is an Economist ofinternational repute with extensiveinterest and experience in all facetsof financial and capital markets.Started his career with RBI, he movedto IDBI where he was ExecutiveDirector. He subsequently becameChairman of UTI and also the firstChairman of SEBI. Presently, he isacting as Chairman of Centre forMonitoring Indian Economy, Mumbai.He is Director of HDFC Limited andmany other Companies of repute.
1. HDFC Limited
2. Quantum FinancialServices Limited
3. Phoenix TownshipLimited
4. Indo NationalLimited
5. Shrenuj Co. Limited
6. SBI Discount andFinance HouseLimited
7. Plus Paper Limited
Dr. P. S. Pritam M.A., LLB.,Ph.D.,F.I.I.I.
Has rich experience of havingworked in financial institutions for 36years. Has held top positions in LIC,including Senior Divisional Manager,Ahmedabad, Zonal Manager,Hyderabad and Director (Marketingand International Operations) atCorporate Office, Mumbai. He is anall rounder and has worked indiverse function areas e.g. accounts,mortgage, legal & corporate,underwriting and client servicing. Hewas also National Head (sales &marketing) of Allianz Bajaj LifeInsurance Company.
None 1. Escorts Limited• Audit Committee• Investor Grievance
Committee• Remuneration Committee• Share Transfer Committee• Loans & Guarantee
Committee• Financial Results Committee• Share Allotment Committee
Dr. M. G. K. Menon B.Sc., M.Sc.,Ph.D [D.Sc.(h.c.)],F.R.S.
Dr. M. G. K. Menon is a distinguishedscientist of international repute. Heis recipient of various laurels abroadapart from the Padma Shri, thePadma Bhushan and the PadmaVibhushan for his outstandingservices to the nation. He has beena M.P., Minister for Science &Technology and Member, PlanningCommission, Govt. of India and hasbeen Secretary to Govt. of India(various Departments) for 12 years.
1. Indfos IndustriesLimited
1. Escorts Limited• Audit Committee• Investors’ Grievance Committee• Remuneration Committee
2. HDFC Limited• Audit Committee
3. Indo National Ltd.• Audit Committee• Investors’ Grievance Committee
4. SBI Discount and Finance HouseLimited• Audit Committee
5. Shrenuj Co. Limited• Audit Committee
6. Phoenix Township Limited• Audit Committee
7. Plus Paper Limited• Audit Committee
1. Escorts Limited• Audit Committee• Investors’ Grievance
Committee• Remuneration Committee• Share Transfer Committee• Loans & Guarantee
Committee• Borrowing Committee• Technology Committee• Financial Results Committee• Share Allotment Committee
2. Indfos Industries Limited• Technology Committee
21
Mr. S. C. Bhargava
● Financial Calendar 2005-2006
(Tentative)
Board / Committee thereof Meetings to take on record
Financial results for Quarter ended 31.12.05 : By the end of January, 2006.
Financial results for Quarter ended 31.03.05 : By the end of April 2006.
Financial results for Quarter ended 30.06.05 : By the end of July 2006.
Financial results for Quarter ended 30.09.05 : By the end of October 2006.
Annual General Meeting for the Financial
ending 30th September, 2006 : By 31st December, 2006
● Date of Book Closure : Monday, 26th December, 2005 to Saturday, 31st December,
2005 (both days inclusive)
● Dividend Payment Date : Due to operational losses incurred by the Company during the 15
months period ended 30th September, 2005, the Board of Directors
of the Company have decided not to recommend any dividend
for the said period.
● Listing Stock Code
1. The Delhi Stock Exchange Association Ltd., 00012
DSE House, 3/1, Asaf Ali Road, New Delhi - 110002
2. The National Stock Exchange of India Ltd., ESCORTS
Trade World, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
3. The Stock Exchange, Mumbai, 500495
Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001
● Listing Fees
The Company is up to date on the payment of the Annual Listing Fees.
Mr. S.C. Bhargava is an eminentpersonality with a rich experience inall facets of insurance. He has heldtop position in LIC including asExecutive Director (Investments)and also attended various seminarsand workshops in India and abroadon behalf of LIC. He has extensiveknowledge in the field of securitiesmarket, treasury operations,investments etc. He had training infinance from reputed institutions likeI.I.M., Ahmedabad and MenchesterBusiness School, U.K. He has alsoworked as member of TechnicalAdvisory Committee on Money,Foreign Exchange and Govt.Securities Market, Reserve Bank ofIndia. Currently he is serving theBoard of many reputed organisations.
1. Escorts Limited2. Indian Rayon &
Industries Limited3. DCM Shriram
Consolidated Limited4. UTI Asset Management
Co. Limited5. J P Associates Limited6. J P Enterprises Limited7. IL & FS Academy for
Insurance & FinanceLimited
8. IL & FS Academy forInsurance & RiskManagement ServicesLimited
9. Bank of MaharashtraLimited
10. OTC Exchange of India11. OTC Securities Limited
B.Com.(Hons),F.C.A.
1. Escorts Limited• Technology
Committee2. Bank of Maharashtra
Limited• Audit Committee• Management
Committee• Large Value Fraud
Committee
Name Qualification Brief Resume and Area Other Committeeof Expertise Directorships Memberships
ESCORTS LIMITED
22
Yearly Stock Market Data
Year Equity Shares Name of the Stock Exchange
High (Rs.) Low (Rs.)
1999-00 269.00 51.00 Mumbai Stock Exchange
2000-01 156.00 66.75 - do -
2001-02 89.35 37.95 - do -
2002-03 76.20 35.00 - do -
2003-04 113.30 34.70 - do -
2004-05 117.35 53.00 - do -
● Market Price Data
Monthly Stock Market Data
High and low prices of Equity Shares during the 15 months period ended 30th September, 2005 were as follows:
National Stock Exchange Mumbai Stock Exchange
Month High Low High Low(Rs.) (Rs.) (Rs.) (Rs.)
July 2004 68.70 54.00 68.40 53.00August 2004 66.40 56.50 66.25 57.75September 2004 70.65 59.45 67.90 62.00October 2004 70.95 62.05 71.35 62.05November 2004 76.70 62.80 75.00 62.50December 2004 74.95 67.00 75.45 67.00January 2005 78.00 62.20 77.95 62.00February 2005 87.15 65.85 87.20 66.10March 2005 102.00 74.00 102.15 74.00April 2005 89.60 70.20 89.60 76.00May 2005 88.00 76.05 90.00 76.10June 2005 94.30 81.30 94.25 81.65July 2005 115.00 81.10 111.50 82.00August 2005 117.20 93.00 117.35 93.00September 2005 113.00 90.00 114.00 90.00
23
● Registrar and Share Transfer Agents
The Company carries on the share transfer work in-house at:
ESCORTS LTD.
Corporate Secretariat & Law, 15/5, Mathura Road, Faridabad.Phone: 0129 – 2250222 Extension 4275 / 4268 ● Fax: 0129 – 2250060E-mail: [email protected] ● Website: www.escortsgroup.com
● Share Transfer System
The Company has a Share Transfer Committee of Directors to approve the transfer, transmission, remat & issue of duplicatecertificates etc. which normally meets four times in a month. The shares received are usually transferred within a period of 8to 12 days from the date of receipt, subject to their validity.
● Investors Relation Centres
Escorts Limited Escorts Limited11, Scindia House, Connaught Circus, 1st Floor Part – 1,New Delhi - 110 001 AO Bldg. at Pandurang Budhkar Marg,Telephone No.: (011) 23310145 Worli, Mumbai - 400 018Fax No.: (011) 23310271 Telephone No.: (022) 24218151-52
Fax No.: (022) 24218153
All enquiries, transfer / transmission / transposition / Demat / Remat requests in respect of shares and debentures bothphysical and electronic, nomination, change of address and payment of dividend / interest / redemption should be addresseddirectly to the Corporate Secretariat & Law.
● Statistics of Dividend payment
Year Rate Date of payment
1993-1994 30% 17th October, 1994
1994-1995 36% 23rd March, 1995 & 7th September, 1995
1995-1996 40% 9th September, 1996
1996-1997 45% 10th September, 1997
1997-1998 45% 15th September, 1998
1998-1999 45% 18th October, 1999
1999-2000 45% 29th May, 2000
2000-2001 45% 22nd October, 2001
2001-2002 10% 11th October, 2002
2002-2003 10% 24th December, 2003
2003-2004 Nil N.A.
2004-2005 Nil N.A.
● Nomination Facility
Shareholders are eligible to file their nominations against shares held under physical mode. The facility of nomination is notavailable to non-individual shareholders such as societies, trusts, bodies corporate, karta of Hindu Undivided families andholders of Powers of Attorney. The investors, who wish to avail this facility, may send prescribed form 2B duly filled in andsigned to the Corporate Secretariat & Law.
● Financial CalendarFrom 1st October, 2005 to 30th September, 2006.
● Distribution of Shareholding
As on 30th September, 2005
Category %
1. Promoters 1.732. Persons acting in concert 28.043. Institutional Investors 30.754. Others 39.48
Total 100.00
ESCORTS LIMITED
24
As on 30th September, 2005
Range of holding Number of shareholders %
1 to 100 43973 55.67
101 to 500 29360 37.16
501 to 1,000 3259 4.13
1,001 to 5,000 2026 2.56
5,001 to 10,000 185 0.23
10,001 to 50,000 124 0.16
50,001 to 1,00,000 18 0.02
Above 1,00,000 56 0.07
Total 79001 100.00
● Dematerialisation of Shares
Till now, approximately 94% Equity Shares have been dematerialized. Trading in Equity Shares of the Company is permittedonly in dematerialized form as per the notification issued by the Securities and Exchange Board of India.
● Liquidity of Shares
The trading volumes at National Stock Exchange and Mumbai Stock Exchange, during the 15 months period ended
30th September, 2005, are given below:
Month National Stock Exchange Mumbai Stock Exchange
No. of Value No. of No. of Value No. ofShares (Rs. in lacs) Transactions Shares (Rs. in lacs) Transactions
July 2004 7343624 4544.28 56148 3403048 2099.40 35223
August 2004 9307890 5857.78 69259 4816835 3029.14 39593
September 2004 5591817 4279.37 47242 4610274 2993.82 37955
October 2004 5363095 3618.00 40056 2843735 1923.69 25551
November 2004 5043833 3567.47 35386 3134370 2183.69 25987
December 2004 10152031 7208.41 61329 5958778 4237.39 46348
January 2005 5039732 3556.12 34103 3028629 2146.98 27077
February 2005 46165909 37124.79 253761 20210188 16081.79 115228
March 2005 40409015 36525.60 232726 17106517 15482.23 101528
April 2005 12618499 10469.97 85324 4625475 3838.67 30394
May 2005 12345999 10272.67 81412 4889411 4083.78 31171
June 2005 16955410 15119.20 128676 5740685 5138.03 35704
July 2005 46572527 47363.54 278225 15708029 15950.52 79608
August 2005 63397854 68760.25 419664 21698375 23616.25 112780
September 2005 41913003 44123.99 285258 13568250 14288.86 79017
Total 328220238 302391.44 2108569 131342599 117094.24 823164
● Outstanding GDRs / ADRs / Warrants etc.
There are no convertible instruments outstanding, which could increase the paid up equity capital of the Company.
25
● Plant locations
The Company has its manufacturing plants at the following locations:
1. 18/4, Mathura Road, Faridabad - 121 007
2. Plot No. 2, Sector 13, Faridabad - 121 007
3. Plot No. 3, Sector 13, Faridabad - 121 007
4. 115, Sector 24, Faridabad - 121 003
● Address for Correspondence
ESCORTS LTD.Corporate Secretariat & Law, 15/5, Mathura Road, Faridabad.
Phone: 0129 – 2250222 Extension 4275 / 4268 ● Fax: 0129 – 2250060
E-mail: [email protected] ● Website: www.escortsgroup.com
● Non Mandatory Requirements
The status / extent of compliance of non mandatory requirements is as follows:
a. Maintenance of Chairman’s Office
As the Chairman is executive and also the Managing Director of the Company so there is no separate office maintained for theChairman.
b. Remuneration Committee
Already constituted. Details given in preceding paragraphs.
c. Half-yearly financial performance and summary of significant events to be sent to each household of shareholders
The above said information is available on website of the Company for Shareholders and General Public.
d. Postal Ballot
The details of resolutions passed through Postal Ballot are given in preceding paragraphs.
Annexure – C to the Directors’ Report
AUDITORS’ CERTIFICATE REGARDING COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE49 OF THE LISTING AGREEMENT
To the Members of Escorts Limited
We have examined the compliance of conditions of Corporate Governance by Escorts Limited for the 15 months period endedSeptember 30, 2005 as stipulated in Clause 49 of the listing agreement of the said Company with the Stock Exchanges in India.
The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to proceduresand implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neitheran audit nor an expression of opinion on the financial statements of the Company.
In our opinion and to the best of our information and explanations given to us, we certify that the Company has complied with the conditionsof Corporate Governance as stipulated in the above-mentioned Listing Agreement.
We state that in respect of investor grievances received during the 15 months period ended September 30, 2005, no investor grievancesare pending against the Company for a period exceeding one month as per records maintained by the Company which are presented tothe Shareholders/Investors’ Grievance Committee.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectivenesswith which the management has conducted the affairs of the Company.
For S. N. Dhawan & Co.Chartered Accountants
S. N. DhawanPlace : New Delhi PartnerDate : January 20, 2006 Membership No. 925
ESCORTS LIMITED
26
Annexure – D to the Directors’ Report
Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956, the Board hereby confirms:1. that in preparation of the annual accounts for the year ended 30th September, 2005, the applicable accounting standards had been
followed.
2. that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of the affairs of the Company as at 30th September, 2005 and ofthe profit and loss of the Company for the year ended 30th September, 2005.
3. that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
4. that the Directors had prepared the annual accounts for the year ended 30th September, 2005 on a going concern basis.
Annexure - E to Directors’ Report
Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules,1975and forming part of the Directors’ Report for 15 months period ended September 30, 2005.
Name of the Employee Age Qualification Experience Date of Designation & Remuneration Received Last Employment held
(Yrs.) (Yrs.) Employment Nature of Duties Gross Net
(Rs.) (Rs.)
A. Employed throughout the period and in receipt of remuneration not less than Rs. 30,00,000 for the period
Anand Suresh 57 M. Tech. 32 08.04.1996 Head - R&D 4770079 1851030 2 Yrs. - Tech. Director, ShriramB. Tech., IIT (AMG) Piston & Rings.
Chopra Rakesh 55 FCA (Eng. & Wales) 32 01.09.1979 Business Head & 11782128 5817869 2 Yrs. - Asst. Manager (Commercial),MBA (Cranfield, U.K.) Sr. Vice President (AMG) Vazir Sultan Tobacco Co. Ltd.
Hawaldar K. S. 55 B.E. Mech., Diploma 32 08.04.1996 Head Operations RED - 4548166 1983217 1 Yr. - VP, Real Value Appliancesin System Mgmt. Engineering Division
Khanna Lalit K. 51 B.Sc., MBA 27 10.05.1978 Vice President 3462618 1386761 1 Yr. - Officer Grade ‘C’Punjab National Bank
Mathur G. B. 55 B.Sc., ACS, LLB 30 16.08.1993 Vice President, Law & 5749858 2767948 3 Yrs. - Co. Secy. ChambalCompany Secretary Fertiliser & Chemicals Ltd.
Nanda Nitasha* 36 B.Com. 10 01.04.1998 Head Group Investment 3456394 637627 –Companies
Sarkar M.C. 58 B.E. Mech. 35 02.04.1993 Head - Mfg. Operations 4465090 2020238 4 Yrs. - GM (Works), Voltas Ltd.M.Tech. in Indst. (AMG)Engg. & Oprtnl. Resch.
Sarkar Partha 54 B Tech., MBA 29 07.08.2000 Vice President 5503185 2019518 3 Yrs. - President,RPG Itochu Fin. Ltd.
Singh Devraj 52 B.Tech. PGDM 28 02.01.1995 Business Head - 7543918 3577663 1 Yr. - VP (Dubai Project), SRF Ltd.Engineering Division
Subbaiah B. K. 54 B.Sc., MBA 30 24.06.2002 Head - All India Sales 3543167 1727113 2 Yrs. - GM Sales - Automotive Divn.South & East Zones - Mahindra & Mahindra
Yadav Yash 49 LLB/MBA 23 02.06.2003 Group VP - HR & IR 5426623 2232956 2 Yrs. - VP - HR & Admin.,The Hindustan Times Ltd.
B. Employed for part of the period and in receipt of remuneration not less than Rs. 2,00,000 per month.
Guha Anup 50 CA 27 01.07.2004 Financial Controller 3316778 1362483 2 Yrs. - Financial Controller -Escotel Mobile Communications Ltd.
Khattar Sriram 47 B.Com (Hons.), FCA 23 26.06.2000 VP - Corp. Strategic 2106706 898410 3 Yrs. - GM, ITC Ltd.Planning & Corporate Affairs
Tandon Shailendra 50 ACA 27 08.09.2004 Group Chief 4850553 1355111 2 Yrs. - President (Financial Plg.)Financial Officer Indo Rama Synthetics (I) Ltd.
Virmani Anil 54 ACA 29 01.07.2004 Group Chief 3373764 1440309 8 Yrs. - Chief Financial Officer -Financial Officer Escotel Mobile Communications Ltd.
NOTES:
* Ms. Nitasha Nanda, Head Group Investment Companies is a relative of Mr. Rajan Nanda, Chairman & Managing Director and Mr. Nikhil Nanda, Executive Director & COO.1. Employees named above are/were wholetime employees of the Company as per terms and conditions of the Company.2. Remuneration Received gross includes Salary, Bonus, Commission, ex-gratia, actual expenditure for provision of rent free accommodation or benefits or amenities, house rent allowance,
medical expenses, leave travel assistance, other allowances, reimbursement of gas,water and electricity expenses. Company’s contribution to provident fund, employee pension scheme,gratuity fund and provision of car valued as perquisites in accordance with rules under the Income Tax Act, 1961, but excluding contribution towards superannuation scheme which is nolonger allocated individually.
3. Remuneration Received ‘Net’ includes salary, bonus, commission, ex-gratia and other allowances but excluding house rent allowance, provident fund and gratuity less Income Tax deductedat source.
4. Employees whose services have been loaned to other Companies have been excluded.
27
AUDITORS’ REPORT
To The Members of Escorts Limited
1. We have audited the attached Balance Sheet of Escorts Limited as at September 30, 2005, the Profit & Loss Account and also theCash Flow Statement for the fifteen months period ended on that date, annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on ouraudit.
2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. Attention is drawn to Note No. 10 (Schedule 19) . The Company has recognised sale of its entire shareholding in Escorts Heart Institute& Research Centre Limited during the period ended September 30, 2005. As stated in the Note, the Hon’ble Delhi High Court orderedstatus quo on a petition filed in this matter. The Company has obtained legal opinion which has advised that the High Court Order hasno adverse effect on the sale transaction.
4. As required by the Companies (Auditor’s Report) Order, 2003, as amended issued by the Central Government of India, in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs4 and 5 of the said Order.
5. Further to our comments in the Annexure referred to above, we report that :
(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for thepurposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examinationof those books.
(c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books ofaccount.
(d) In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with theAccounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.
(e) On the basis of written representations received from the directors, as on September 30, 2005 and taken on record by the Boardof Directors, we report that none of the directors is disqualified from being a director in this Company. However, the Chairman andManaging Director of the Company as on September 30, 2005 is disqualified from being appointed as director in other companiesin terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.
(f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read togetherwith the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India:
i) in the case of the Balance Sheet, of the state of affairs of the Company as at September 30, 2005;
ii) in the case of the Profit & Loss Account, of the Profit for the period ended on that date; and
iii) in the case of the Cash Flow Statement, of the cash flows for the period ended on that date.
For S. N. DHAWAN & CO.Chartered Accountants
(S. N. DHAWAN)Partner
M.No.: 925
Date: January 20, 2006
ESCORTS LIMITED
28
ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE ON THE ACCOUNTS OF ESCORTS LIMITED FORTHE FIFTEEN MONTHS PERIOD ENDED SEPTEMBER 30, 2005.
i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
(b) According to the information and explanations given to us, physical verification of fixed assets is being conducted in a phasedmanner by the management under a programme designed to cover all the fixed assets over a period of three years, which, in ouropinion, is reasonable having regard to the size of the Company and the nature of its assets. Discrepancies noticed on suchverification were not material and have been properly dealt with in the books of account.
(c) According to the information and explanations given to us, the Company has not disposed off a substantial part of fixed assetsduring the period under review.
ii) (a) As explained to us, the inventories have been physically verified by the management at reasonable intervals during the period,except for materials lying with third parties for which certificates confirming stocks held by them have been obtained in most of thecases.
(b) In our opinion and according to information and explanations given to us, the procedures of physical verification of inventoriesfollowed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) In our opinion and according to information and explanations given to us, the Company has maintained proper records of itsinventories. Discrepancies noticed on physical verification of inventories were not material and have been properly dealt with inthe books of account.
iii) (a) The Company has granted unsecured loans to three companies covered in the register maintained under Section 301 of theCompanies Act, 1956. The maximum amount involved during the period was Rs.12.51 crores and balance of the loans granted tosuch companies was Rs.11.55 crores as at September 30, 2005.
(b) As explained to us, in respect of outstanding loans including interest accrued up to June 30, 2004 the repayments are notforthcoming due to financial constraints of these companies. In view of the aforesaid, no interest has been charged during theperiod under review. A provision amounting to Rs. 6.91 crores has been made for the amount considered doubtful of recovery.
(c) The Company has taken loans from three companies covered in the register maintained under Section 301 of the Companies Act,1956. The maximum amount involved during the period is Rs.103.37 crores and the balance of loans taken from such companiesis Rs. 37 crores as at September 30, 2005.
(d) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions ofsuch loans are not, prima facie, prejudicial to the interest of the Company.
(e) The Company has been regular in repaying the principal amounts and interest, as stipulated.
iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensuratewith the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods andservices. During the course of our audit, we have neither come across nor have been informed of any continuing failure to correct majorweaknesses in the internal control.
v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangementsreferred to in Section 301 of the Companies Act, 1956 have been entered in the register maintained under that section.
(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts orarrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have been made at prices whichare reasonable having regard to the prevailing market prices at the relevant time except for items stated to be of a specialisednature where no comparison is possible.
vi) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections58A, 58AA and other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 withregard to deposits accepted from the public except that:
(a) Deposits amounting to Rs. 15.54 crores had matured as at September 30, 2005. The Company had filed a petition/return underSection 58AA to the competent authority and repaid the deposit pertaining to small investors to the tune of Rs. 3.54 crores byNovember 30, 2005.
(b) For a part of the period the mandatory investments fell short of the requirement as per Rule 3A of the Companies (Acceptance ofDeposits) Rules, 1975 which was made good subsequently.
We are informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bankof India or any Court or any other Tribunal .
vii) In our opinion, the Company has an internal audit system which needs to be strengthened and scope enlarged to make it commensuratewith the size and nature of its business.
viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Governmentfor the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of the tractors and auto-ancillaryproducts and are of the opinion that prima-facie the prescribed accounts have been made and maintained. We have, however, notmade a detailed examination of the records with a view to determine whether they are accurate and complete.
ix) (a) The Company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund,investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty,excise duty, cess and other material statutory dues applicable to it except as in certain instances where delays were noticed.
According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investoreducation and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
29
duty, cess were in arrears, as at September 30, 2005 for a period of more than six months from the date they became payableexcept as follows :
Name of the Statute Nature of Amount Period to which thethe Dues (Rs. in crores) amount relates
Maharashtra Sales Tax Act, 1959 Sales Tax 0.58 2004-05Local Area Development Tax, Haryana Local Area Development Tax 2.88 2004-05Haryana VAT Act, 2003 VAT 0.88 2004-05
b) According to the information and explanations given to us, the details of statutory dues of income-tax, sales-tax, wealth-tax,service tax, customs duty, excise duty, cess which have not been deposited on account of dispute are given below:
Name of the Statute Nature of Dues Amount Period to which Forum where(Rs. Crores) the amount relates dispute is pending
Sales Tax Acts Sales Tax 0.81 1979-05 Appellate AuthorityCentral Excise Act, 1944 Excise Duty 0.55 1979-1998 Appellate AuthorityCentral Excise Act, 1944 Excise Duty 12.06 1989-2003 CESTATCentral Excise Act, 1944 Excise Duty 19.93 1995-1999 Supreme CourtIncome Tax Act, 1961 Income Tax 0.84 1986-87 CIT(A)Income Tax Act, 1961 Income Tax 9.41 2001-02 ITAT (The demand was revised
to Rs. 44.86 crores out of whichRs. 35.45 crores has been paidunder protest.
x) In our opinion, the accumulated losses of the Company are not more than fifty percent of its net worth as at September 30, 2005. TheCompany has not incurred cash losses during the financial period covered by our audit. However, in the immediately preceding financialyear, there were cash losses.
xi) In our opinion and according to the information and explanations given to us, considering the rescheduled dates of repayment of theDebentures and Loans, the Company has not defaulted in repayment of dues to a financial institution or bank or debenture holdersexcept in the following cases:
Particulars Amount Due on Remarks(Rs. In crores)
Bank of India 2.81 (3 instalments of July 11, 2005 each month till Lying unpaidRs.93.75 lacs per month) September 30, 2005
Jammu & Kashmir Bank Ltd. 0.70 (Interest) July 31, 2005 Amount since paid(Debenture-holder)
Lord Krishna Bank 0.21 (Interest) September 30, 2005 Pending
xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.
xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, provisions of clause (xiii) of Paragraph4 of the Order are not applicable to the Company.
xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause (xiv) of Paragraph 4 of the Order are not applicable to theCompany.
xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has givenguarantees for loans taken by others from banks and financial institutions, are not prima facie prejudicial to the interest of the Company.
xvi) To the best of our knowledge and belief and according to the information and explanations given to us, the term loans availed by theCompany were applied for the purposes for which the loans were obtained.
xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, wereport that no funds raised on short-term basis have been used for long-term investment.
xviii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to partiesand companies covered in the register maintained under Section 301 of the Companies Act, 1956.
xix) The Company has not issued any debentures during the year. Therefore, the provisions of clause (xix) of Paragraph 4 of the Order arenot applicable to the Company.
xx) The Company has not raised any money by public issue during the period under review.xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company
has been noticed or reported during the course of our audit.
For S.N. DHAWAN & CO. Chartered Accountants
(S. N. DHAWAN)Partner
Date: January 20, 2006 M. No. : 925
ESCORTS LIMITED
30
BALANCE SHEET AS AT SEPTEMBER 30, 2005
30.09.2005 30.06.2004Schedule Rs. Crores Rs. Crores
SOURCES OF FUNDSShare Capital 1 72.23 72.23Reserves & Surplus 2 545.90 521.05
Total Shareholders’ Funds 618.13 593.28Loans
Secured 3 427.91 612.90Unsecured 4 240.54 668.45 281.47 894.37
Total 1,286.58 1,487.65
APPLICATION OF FUNDSFixed Assets
Gross Block 1,006.31 1,030.12Less : Depreciation 492.85 446.67
Provision for Impairment — 6.04
Net Block 5 513.46 577.41Capital Work-in-Progress 2.38 3.52
Total Fixed Assets 515.84 580.93Investments 6 497.07 612.88Deferred Tax Asset (Net) 78.63 31.52(Refer Note 12 of Schedule 19)Current Assets, Loans & AdvancesCurrent Assets 7
Inventories 125.94 120.04Sundry Debtors 176.84 253.92Cash & Bank Balances 148.52 27.13Other Current Assets 0.12 0.12
451.42 401.21Loans & Advances 8 179.18 220.73
Total Current Assets, Loans & Advances 630.60 621.94
DEDUCTCurrent Liabilities & Provisions 9
Current Liabilities 401.70 343.96Provisions 52.70 30.70
Total Current Liabilities & Provisions 454.40 374.66
Net Current Assets 176.20 247.28Miscellaneous Expenditure(to the extent not written off or adjusted) 18.84 15.04
Total Fixed Assets, Investments and Current Assets 1,286.58 1,487.65
Significant Accounting Policies 18Notes to Accounts 19
Schedules 1-19 annexed hereto form an integral part of Balance Sheet and Profit and Loss Account.
RAJAN NANDA NIKHIL NANDA DR. M. G. K. MENONChairman and Executive Director & COO DirectorManaging Director
Dr. S. A. DAVE Dr. P. S. PRITAM S. C. BHARGAVADirector Director Director
G. B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
As per our report attachedFor S.N. DHAWAN & CO.
Chartered Accountants
C-37, Connaught Place S.N. DHAWANNew Delhi - 110 001 PartnerDated : January 20, 2006 M. No. 925
31
PROFIT & LOSS ACCOUNT FOR THE 15 MONTHS PERIOD ENDED SEPTEMBER 30, 2005
Period ended Period ended30.09.2005 30.06.2004
Schedule Rs. Crores Rs. Crores
INCOMESales (Gross) 1307.88 1,250.01Less : Excise Duty 38.75 151.94Net Sales 1,269.13 1,098.07Business Income 10 38.80 22.74Income from Investments 11 505.73 0.21
Total 1,813.66 1,121.02
EXPENDITUREMaterial, Manufacturing & Operating Expenses 12 968.88 780.14Personnel 13 185.79 209.73Sales & Administration Expenses 14 181.21 187.83Interest 15 141.79 101.66
1477.67 1,279.36
Profit/(Loss) before Depreciation and Amortisation 335.99 (158.34)Depreciation 61.59 64.69Less : Transfer of depreciation from Revaluation Reserve 8.73 8.98
52.86 55.71Amortisation of Miscellaneous Expenditure 16 9.09 61.95 12.63 68.34
274.04 (226.68)Loss on Sale/Provision for diminution in Investments,Current Assets, Loans & Advances and Write Offs 17 243.02 195.06
PROFIT/(LOSS) BEFORE TAX 31.02 (421.74)Provision for Taxation
Current Taxation 39.04 –Deferred Taxation (47.11) (8.07) (108.20) (108.20)
PROFIT/(LOSS) AFTER TAX 39.09 (313.54)Balance brought forward (218.90) 88.75
Transfer from Debenture Redemption Reserve 12.70 5.89
Total (167.11) (218.90)
APPROPRIATIONSDebenture Redemption Reserve 2.16 –General Reserve –Dividend on Equity Shares — –Dividend Tax on Final Dividend — –Profit/(Loss) carried to Balance Sheet (169.27) (218.90)
Total (167.11) (218.90)
Significant Accounting Policies 18Notes to Accounts 19
EARNINGS PER SHARE (Face Value Rs.10)Basic Earnings per Share (in Rupees) 5.41 (43.41)Diluted Earnings per Share (in Rupees) 5.41 (43.41)
Schedules 1-19 annexed hereto form an integral part of Balance Sheet and Profit and Loss Account.
RAJAN NANDA NIKHIL NANDA DR. M. G. K. MENONChairman and Executive Director & COO DirectorManaging Director
Dr. S. A. DAVE Dr. P. S. PRITAM S. C. BHARGAVADirector Director Director
G. B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
As per our report attachedFor S.N. DHAWAN & CO.
Chartered Accountants
C-37, Connaught Place S.N. DHAWANNew Delhi - 110 001 PartnerDated : January 20, 2006 M. No. 925
ESCORTS LIMITED
32
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 1 : SHARE CAPITAL
30.09.2005 30.06.2004Rs. Crores Rs. Crores
AUTHORISED CAPITAL
7,70,00,000 Equity Shares of Rs. 10 each 77.00 77.00
33,30,00,000 Unclassified Shares of Rs. 10 each — 333.00
7,73,00,000 Unclassified Shares of Rs. 100 each 773.00
850.00 410.00
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
7,22,32,240 Equity Shares of Rs. 10 each 72.23 72.23
NOTES :
1. Paid-up Capital includes :
(i) 18,700 Equity Shares (2003-2004 - 18,700) allotted as fully paid-up for consideration other than cash pursuant to contracts.
(ii) Bonus Shares :
1,94,34,125 Equity Shares allotted before 1988 as fully paid-up by capitalising Share Premium of Rs. 0.22 crores and GeneralReserve of Rs. 19.21 crores.
2. The Authorised Capital of the Company relating to Unclassified Shares has been increased by Rs. 440 crores and reclassified as7,73,00,000 Unclassified shares of Rs. 100 each amounting to Rs. 773 crores.
SCHEDULE 2 : RESERVES AND SURPLUS
Rs. Crores
Share Capital Share Amalgamation Debenture General Profit Revaluation TotalPremium Redemption Forfeiture Reserve Redemption Reserve & Loss ReserveReserve Reserve Reserve Reserve Account
As at June 30, 2004 84.67 0.81 3.22 48.46 21.79 469.62 (218.90) 111.38 521.05
Additions during the period
Transfer from Profit & Loss Account 2.16 2.16
84.67 0.81 3.22 48.46 23.95 469.62 (218.90) 111.38 523.21
Deductions during the period :
On assets sold 5.51 5.51
Transfer to Profit & Loss Account 12.70 (a) (218.90) 8.73 (197.47)
Debit balance of Profit & Loss Account 169.27 169.27
As at September 30, 2005 84.67 0.81 3.22 48.46 11.25 300.35 – 97.14 545.90
(a) Consequent to part redemption of Non-Convertible Debentures during the 15 months period ended 30th September 2005.
33
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 3 : SECURED LOANS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
From Banks :Cash Credit/Working Capital Term Loans 238.07 269.85Interest Accrued & Due 1.00 2.03
Term LoansFrom Banks 113.10 89.93Interest Accrued & Due 0.34 0.86
From Others 29.20 142.11Interest Accrued & Due 0.18 1.79
Under Asset Credit Scheme 0.09 9.00
Debentures :12% Secured Redeemable Non-Convertible Debentures — 50.7812% Secured Redeemable Non-Convertible Debentures 20.00 20.0012% Secured Redeemable Non-Convertible Debentures 25.00 25.00Interest Accrued & Due 0.93 1.55
Total 427.91 612.90
NOTES :
1. Cash Credit including Working Capital Term Loan from Banks :Secured by hypothecation of stocks and book debts on pari-passu basis except in case of:Export Credit Facility from HDFC Bank - Rs.10 Crores
2. Term Loans from Banksa) Bank of India : Rs. 7.50 Crores
The above are secured by first pari-passu mortgage and charge on immovable and movable assets.
b) Punjab National Bank : Rs. 15.00 CroresThe above are secured by first pari-passu mortgage and charge on immovable and movable assets. The mortgage shall rankpari-passu with the mortgages and charges created in favour of the existing Term Lenders and the Trustees of the various seriesof Debentures except the series of Debentures issued and allotted to ICICI Limited and J & K Bank Limited and shall ranksubservient to the mortgage created in favour of the said series of Debentures.
c) United Bank of India : Rs. 25.00 CroresSecured by first pari-passu charge on the Company’s fixed assets, pending creation.
d) UTI Bank Ltd. Rs. 65.60 CroresSecured against assignment of Unsecured Subordinated Bond of Idea Mobile Communications Ltd.(Also refer Note 8 b in Schedule 19)
3. Term Loans from Othersa) Industrial Development Bank of India : Rs. 27.75 Crores
Secured by first pari-passu mortgage and charge on immovable and movable assets.
b) Life Insurance Corporation of India : Rs. 1.03 CroresSecured against Insurance Policies.
c) Vehicle loans are secured against the Vehicles financed : Rs. 0.42 Crores
4. Under Asset Credit SchemeRabo India Finance Private Ltd.: Rs. 0.09 CroresSecured by an exclusive charge by way of hypothecation of the equipment financed.
5. Debentures(i) 20-12% Secured Redeemable Non-Convertible Debentures of Rs. 1,00,00,000/- each (Date of allotment - 19th July, 2002) These
Debentures were redeemable at the end of 18 months from the date of allotment i.e. 15th January, 2004, have been rescheduledfor repayment in 16 equated quarterly instalments of Rs. 1.25 crores each, commencing 17th December, 2005.These Debentures are secured by first pari-passu mortgage and charge on immovable and movable assets of the Company.
(ii) 2,50,00,000 - 12% Secured Redeemable Non-Convertible Debentures of Rs.10/- each (Date of allotment - 31st January, 2003)These Debentures are redeemable at the end of 36 months from the date of allotment i.e. on 31st January, 2006.These Debentures are secured by first pari-passu mortgage and charge on immovable and movable assets of the Company.
ESCORTS LIMITED
34
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 4 : UNSECURED LOANS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Fixed DepositsOthers 99.27 150.16
Inter-Corporate DepositsFrom Subsidiaries — 13.50From Others 73.84 61.64
Interest accrued & due 0.04 0.07Banks Book Overdraft 24.46 5.15Other Long Term Loans
From Banks 6.00 10.00Interest accrued & due — 0.10
Others 27.23 8.42Interest accrued & due 0.53 –
Short Term LoansFrom Banks 1.13 17.89Rabo India Finance Private Limited 7.89 12.50Interest accrued & due 0.15 2.04
Total 240.54 281.47
SCHEDULE 5 : FIXED ASSETSRs. Crores
Description Original Additions Deductions Cost as at Provision for Depreciation/ Depreciation/ Deductions Depreciation/ Net Book Net BookCost as at 30.09.2005 Impairment Amortisation/ Amortisation during Amortisation Value as on Value as on30.06.2004 for the period Impairment upto for the period the period upto 30.09.2005 30.09.2005 30.06.2004
30.06.2004
Tangible Assets:Land 95.09 1.75 5.08 91.76 – 0.02 0.03 – 0.05 91.71 95.07Buildings 227.07 0.37 9.67 217.77 – 104.87 11.55 4.54 111.88 105.89 122.20Plant & Machinery 552.25 7.88 8.34 551.79 – 243.44 35.18 5.68 272.94 278.85 308.81Furniture & Fixtures 95.30 1.10 2.75 93.65 – 68.68 6.24 2.45 72.47 21.18 26.62Vehicles 9.47 0.54 2.08 7.93 – 5.45 1.31 1.37 5.39 2.54 4.02Leasehold Improvements 1.96 1.45 – 3.41 – 1.58 0.87 – 2.45 0.96 0.38
981.14 13.09 27.92 966.31 – 424.04 55.18 14.04 465.18 501.13 557.10Assets held for Sale:Land 1.43 – 1.43 – – – – – – – 1.43Buildings 1.80 – 1.80 – – 1.63 – 1.63 – – 0.17Plant & Machinery 5.78 – 5.78 – – 5.78 – 5.78 – – –
Sub-Total 990.15 13.09 36.93 966.31 – 431.45 55.18 21.45 465.18 501.13 558.70
Intangible Assets:Prototypes 1.21 – – 1.21 – 0.97 0.19 – 1.16 0.05 0.24Technical know-how 23.99 0.03 – 24.02 – 11.96 3.74 – 15.70 8.32 12.03Software 14.77 – – 14.77 – 8.33 2.48 – 10.81 3.96 6.44
Sub-Total 39.97 0.03 – 40.00 – 21.26 6.41 – 27.67 12.33 18.71
Capital Work-in-Progress 3.52 2.21 3.35 2.38 – – – 2.38 3.52
Total 1,033.64 15.33 40.28 1,008.69 – 452.71 61.59 21.45 492.85 515.84 580.93
Previous Year Figures 1,011.87 39.26 17.49 1,033.64 6.04 385.80 64.69 3.82 446.67 580.93
NOTES :
1. Land includes :
(a) Leasehold at cost Rs. 0.38 crores.
(b) Rs. 6.75 crores pending registration in the name of the Company.
2. Buildings include (at net book value) :
(a) Rs. 0.22 crores pending registration in the name of the Company.
35
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 6 : INVESTMENTS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
LONG TERM (At Cost)
GOVERNMENT SECURITIES
[Current period Rs. 17,000, (Previous period Rs. 17,000)] – –
QUOTED INVESTMENTS
TRADE INVESTMENTS
OTHER THAN SUBSIDIARYEscorts Finance Limited
38,19,700 Equity Shares of Rs. 10 each fully paid 4.01 4.01
OTHER INVESTMENTSMahindra & Mahindra Limited
7,665 Equity Shares of Rs. 10 each fully paid 0.01 0.01
Asahi India Glass Limited18,862 Equity Shares of Rs. 10 each fully paid 0.10 0.10
UNQUOTED INVESTMENTS
TRADE INVESTMENTS
OTHER THAN SUBSIDIARY
Carraro India Limited1,96,00,000 Equity Shares of Rs. 10 each fully paid 19.60 19.60
Escorts Finance Limited95,00,000 10% Cumulative Redeemable Preference Shares of
Rs. 10 each fully paid 9.50 9.50
OTHER THAN TRADE INVESTMENTSSUBSIDIARY
Escorts Automotives Limited1,00,00,000 Equity Shares of Rs. 10 each fully paid 23.66 23.66
Escorts Construction Equipment Limited4,00,00,000 Equity Shares of Rs. 10 each fully paid 40.00 40.00
80,00,000 10% Cumulative Redeemable Preference Shares ofRs. 10 each fully paid. 8.00 7.81(1,90,000 shares purchased during the period)
2,30,00,000 10% Non-Cumulative Redeemable Preference Shares ofRs. 10 each fully paid 23.00 23.00
Escorts AgriMachinery Incorporated, USA750 Shares with Nil par value amounting to US $ 11,4425 million 49.29 41.63
(Amount subscribed during the period USD 1.75 millionequivalent to Rs. 7.66 crores)
Escorts Heart Institute & Research Centre Limited– Equity Shares of Rs. 10 each fully paid – 1.60
(16,00,000 shares divested during the period)
Escorts Securities Limited12,00,000 10% Cumulative Redeemable Preference Shares of
Rs.10/- each fully paid 1.20 1.20
Escorts Assets Management Limited30,00,000 Equity Shares of Rs. 10 each fully paid 3.00 3.00
ESCORTS LIMITED
36
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 6 : INVESTMENTS (Contd.)
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Esconet Services Limited3,00,02,800 Equity Shares of Rs. 10 each fully paid 30.00 30.00
2,50,00,000 3% Cumulative Redeemable Preference Shares ofRs.10/- each fully paid 25.00 25.00
1,43,00,000 3% Non-Cumulative Redeemable Preference Shares ofRs.10/- each fully paid 14.30 14.30
Escosoft Technologies Limited1,50,50,150 Equity Shares of Rs. 10 each fully paid 15.05 15.05
Escorts Telecommunications Limited5,70,00,000 Equity Shares of Rs. 10 each fully paid 57.00 57.00
Escorts Telecom Services Limited50,000 Equity Shares of Rs. 10 each fully paid 0.05 0.05
Escorts Healthcare Services Limited50,000 Equity Shares of Rs. 10 each fully paid 0.05 0.05
OTHER THAN SUBSIDIARY
Escorts Finance Investment & Leasing Private Limited4,00,00,000 Equity Shares of Rs. 10 each fully paid 40.00 40.00
43,82,000 5% Non-Cumulative Redeemable Preference Shares ofRs.100/- each fully paid 43.82 43.82
Escotrac Finance & Investments Private Limited4,00,00,000 Equity Shares of Rs. 10 each fully paid 40.04 40.04
1,00,00,000 10% Cumulative Redeemable Preference Shares ofRs. 10 each fully paid 10.00 10.00
4,84,40,000 5% Non-Cumulative Redeemable Preference Shares ofRs.10/- each fully paid 48.44 48.44
Drillmac Limited (in liquidation)20,000 Equity Shares of Rs. 10 each fully paid 0.02 0.02
The Faridabad Central Co-operative Consumers Stores Limited447 Equity Shares of Rs. 10 each fully paid – –
[Current period (Rs. 4,917), Previous period (Rs. 4,917)]
Escorts Electronics Limited (in liquidation)32,000 Equity Shares of Rs. 100 each fully paid 0.32 0.32
Hughes Escorts Communication Limited37,64,992 Equity Shares of Rs. 10 each fully paid 3.76 3.76
Escorts Motors Limited1,00,000 Equity Shares of Rs. 10 each fully paid 1.50 1.50
OTHER INVESTMENTS
Idea Mobile Communication LimitedZero percent Unsecured Subordinated Bond (Refer Note 5) 175.74 175.74
Unit Trust of India1,830 Units under Venture Capital Unit Scheme - 1990 0.02 0.02
(VECAUS - II) of Rs. 100 each fully paid
Credit Capital Finance Corporation Limited100 Equity Shares of Rs. 10 each fully paid – –
[Current year ( Rs. 1,000), Previous year (Rs. 1,000)]
37
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 6 : INVESTMENTS (Contd.)
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Asahi India Glass Limited25,150 10% Cumulative Redeemable Preference Shares
of Rs. 10 each fully paid 0.03 0.03
686.51 680.26
Less : Provision for diminution in value of Investments in :Escorts Electronics Limited (in liquidation) (0.32) (0.32)Drillmac Limited (in liquidation) (0.02) (0.02)Esconet Services Limited (60.43) (10.04)Escorts Telecommunications Limited (42.00) (57.00)Idea Mobile Communications Limited (57.86) –Escosoft Technologies Limited (15.05) –Escorts Automotives Limited (13.66) –Escorts Telecom Services Limited (0.05) –Escorts Healthcare Services Limited (0.05) –
Total 497.07 612.88
NOTES :
1. Quoted Investments :
Book Value 4.12 4.12
Market Value 5.27 3.20
2. Unquoted Investments
At cost 682.39 676.14
3. Other than the provision made in respect of permanent diminution in value of investments, there is no investment, which in the opinionof the management has suffered a diminution other than temporary in nature.
4. The following investments have been pledged to secure loans for the company
a) 30,00,000 shares of Carraro India Limited have been pledged with HDFC Bank.
b) 59,99,830 shares of Escorts Telecommunications Limited (ETL) are pledged with Infrastructure Development Finance CompanyLimited to secure guarantee assistance and loans for ETL.
c) 37,52,492 shares of Hughes Escorts Communications Limited are being held by UTI Bank Limited as security for the financialassistance availed by the Company. (Refer Note 8 b in Schedule 19)
d) Bonds of Idea Mobile Communications Limited provided as security to UTI Bank Limited for loan assistance.(Refer Note 8 b in Schedule 19)
ESCORTS LIMITED
38
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 7 : CURRENT ASSETS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Interest accrued on Investments and Deposits 0.12 0.12
Stocks (as taken, valued and certified by the Management)Raw Material and Components 85.80 72.60Finished & Trading Goods 23.68 24.07Work-in-Progress 4.93 7.59Stores and Machinery Spares 7.54 8.12Loose Tools 10.40 10.03
132.35 122.41Less : Provision for Obsolescence of Inventory 6.41 2.37
125.94 120.04
Sundry DebtorsDebts outstanding for over six months
Secured 1.70 1.16Unsecured - Considered Good 11.17 50.64
- Considered Doubtful 67.87 20.04
80.74 71.84Less : Provision for Doubtful Debts 67.87 20.04
12.87 51.80
Other DebtsSecured 1.86 14.80Unsecured - Considered Good 162.11 187.32
163.97 202.12Less : Provision for Doubtful Debts – –
163.97 202.12
Cash & Bank BalancesCash in Hand 0.47 0.44Cheques in hand and in transit 5.32 0.67Banks :
On Current/Cash Credit accounts with Scheduled Banks 33.14 11.40Held in Escrow Account (Refer Note 10 a in Schedule 19) 85.08On Short term/Fixed Deposit with Scheduled Banks
Pledged with Banks 14.50 3.33Others 10.00 11.28
In Post Office Savings Bank Accounts 0.01 0.01(Pledged as security with Government Authorities)
148.52 27.13
Total 451.42 401.21
Debts from Subsidiary Companies 71.30 10.93
39
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 8 : LOANS & ADVANCES
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Loans :Unsecured - Considered Good 71.60 95.37
- Considered Doubtful 13.41 13.45
85.01 108.82Less : Provision for Doubtful Loans 13.41 71.60 13.45 95.37
Inter-Corporate Deposits :Unsecured - Considered Doubtful 0.51 0.51
0.51 0.51Less : Provision for doubtful Inter-Corporate Deposits 0.51 – 0.51 –
Advances recoverable in cash or in kind or for value to be received :Unsecured - Considered Good 101.55 116.89
- Considered Doubtful 178.90 133.42
280.45 250.31Less : Provision for doubtful Advances 178.90 101.55 133.42 116.89
Deposits :Deposits - Considered Good 6.03 8.47
- Considered Doubtful 0.07 0.08
6.10 8.55Less : Provision for doubtful Deposits 0.07 6.03 0.08 8.47
Total 179.18 220.73
NOTES : (Rs. Crores)
On account Maximum balance On account Maximum balanceof loans/ outstanding at any of loans/ outstanding at any
advances as time during the advances as time during theon 30.09.2005 period on 30.06.2004 year
1. Balance due from :Companies under the same management
Escorts Finance Limited 6.44 10.59 -1 -1Goetze (India) Limited (ceased to be such – – – 0.61
w.e.f. 29th January, 2004)Subsidiary Companies
Escosoft Technologies Limited 5.92 6.03 2.75 2.86Esconet Services Limited 5.06 5.89 5.90 22.12Escorts Automotives Limited 82.62 82.63 77.09 79.67Escorts Telecommunications Limited 142.62 142.62 139.53 139.67
(refer note no. 2 below)Escorts Telecom Services Limited – – – 0.01Escorts Construction Equipment Limited 0.06 0.18 0.04 57.31Escotel Mobile Communications Limited – – – 87.86
(ceased to be a subsidiary w.e.f. 10th June, 2004)Escorts Hospital & Research Centre Limited3 – 0.22 0.10 0.20Escorts Heart Institute & Research Centre Limited3 – 0.71 – 0.34Escorts Securities Limited 0.76 0.88 0.86 0.89Escorts Assets Management Limited 0.01 0.08 0.07 0.12Cellnext Solutions Limited 0.27 0.27 0.06 0.06Escotoonz Entertainment Private Limited 0.58 0.58 – –iServ India Solutions Private Limited 0.13 0.13 Rs. 1,116 0.01Automatrix India Private Limited – – Rs. 24,529 0.01Escorts Healthcare Services Limited – – Rs. 5,665 Rs. 5,665
1 Not a Company under same Management for the previous period ended 30th June 2004. Hence disclosure is not applicable.2 Represents the loan liability of Escorts Telecommunication Limited (ETL) consequent to the divestment vide agreement dated
15th January 2004. The amount would be written off after completion of certain formalities regarding transfer of shares.However, provision for entire amount has been made. (Refer Note 8 a of Schedule 19)
3 Subsidiary upto 28th September 2005.2. In respect of Inter-Corporate deposits earlier placed with third parties though the principal amounts have been received, the interest
accrued and due on these deposits amounting to Rs. 1.14 crores is still pending recovery. Adequate provision amounting to Rs. 1.14crores has been made.
ESCORTS LIMITED
40
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 9 : CURRENT LIABILITIES & PROVISIONS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
CURRENT LIABILITIESAcceptances 55.71 59.69Sundry Creditors
SSI Undertakings 14.25 28.60Others 202.11 216.36 181.15 209.75
Subsidiary Companies – –Liability towards Investors Education and Protection Fund underSection 205C of the Companies Act, 1956 will be determinedon the respective due datesi) Unpaid Dividends 1.21 1.76ii) Unpaid Matured Deposits 15.54 4.67iii) Unpaid Matured Debentures 0.75 1.04iv) Unpaid Matured Secured Premium Notes 0.10 0.13v) Interest accrued on (i) to (iv) above 0.11 17.71 0.47 8.07
Advance Payments 36.47 11.15
Other Liabilities 65.56 44.47Interest accrued but not due on loans 9.89 10.83
401.70 343.96
PROVISIONSLeave Encashment 7.52 5.61Taxation 315.05 276.01Less : Advance Income Tax 269.87 45.18 250.92 25.09
52.70 30.70
Total 454.40 374.66
NOTES :1. Estimated amounts of contracts remaining to be executed on capital account
and not provided for 5.00 3.97
2. * Claims not acknowledged as debts 2.99 0.55
3. There is a Contingent liability of :
* (a) Excise duty demands not acknowledged as liability 32.54 43.89
* (b) ESI additional demand not acknowledged as liability 11.96 11.71
* (c) Sales Tax demand not acknowledged as liability 0.81 0.92
* (d) Pending Legal Cases - Personnel 3.43 3.19
* (e) Demand raised by Faridabad Municipal Corporation for external developmentcharges where the Company is in litigation 2.38 2.38
* (f) Bills discounted with Banks/Financial Institutions 31.71 69.51
@ (g) i) Demand raised by Income Tax Department, disputed by the Company andappeal has been filed 44.86 45.00
ii) Others 0.84 –
Gross 128.53 176.60
Net of Tax 85.27 111.97(h) Guarantees executed in favour of Customs/Excise Authorities 9.33 9.04
41
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 9 : CURRENT LIABILITIES & PROVISIONS (Contd.)
Notes :
* The amounts indicated as contingent liability or claims against the Company only reflect the basic value. Interest or legal costs, being
indeterminable are not considered.
@ In the period 2003-04, an addition of Rs. 88 crores had been made by the Income Tax Department, being 80% of the net worth of
Escorts Heart Institute & Research Centre Limited (erstwhile subsidiary of the Company), along with a few other disallowances and
hence created a demand of Rs. 53.08 crores. After first appeal, considering the relief allowed by CIT (Appeals), the revised demand
works out to Rs. 44.86 crores.
The appeal is pending before the Income Tax Appellate Tribunal.
According to the Company, the demand shall not survive after the appeals since it is highly contentious and debateable. However, an
amount of Rs. 35.45 crores has been adjusted / paid till date under protest.
4. The Company has given guarantees on behalf of Escorts Construction Equipment Limited to Bank of Baroda as the lead bank for
consortium of banks for Rs. 22.00 crores and to Technology Information Forecasting and Assessment Council of India (TIFAC) for
Rs. 2.31 crores, to Canara Bank for Rs. 0.75 crores and to SIDBI for Rs. 2.00 crores for credit facilities. The value of guarantees
actually utilised as on 30.9.2005 were Rs. 24.69 crores.
5. The Company has given a guarantee on behalf of Escotoonz Entertainment Private Limited to Rajasthan Asset Management Company
Private Limited (RAMC) for Rs. 2.00 crores for venture capital assistance. The value of guarantee actually utilised as on 30.09.2005
was Rs. 2.00 crores.
6. The Company has given a guarantee on behalf of Escosoft Technologies Limited to HDFC Bank Limited for Rs. 5.00 crores for credit
facilities granted to them.
The value of guarantee actually utilised as on 30.09.2005 was Rs. 0.05 crores.
7. Vide an agreement dated 15th January 2004 between Escotel Mobile Communications Limited (EMCL) and the Company, contingent
liability amounting to Rs. 21.30 crores on account of sales tax, service tax excise duty, DoT claims, consumer court cases and Stamp
Duty exists. In the event of any such claims being crystallized, the amount can be set off from the redemption proceeds of Bonds of Idea
Mobile Communications Limited.
8. Included in SSI Undertakings, an amount of Rs. 14.25 crores pertaining to dues of SSI Undertakings which are outstanding for more
than 30 days as at September 30, 2005.
The names of such SSI Undertakings are given in Annexure - II to Schedule 19.
ESCORTS LIMITED
42
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 10 : BUSINESS INCOME
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
BUSINESS INCOME
Commission * 0.53 0.37
Erection & Servicing 1.76 1.09
Surplus on Sale of Assets (Net) 6.30 –
Cash Subsidy/Duty Drawback 12.99 4.52
Scrap Sale 2.31 2.12
Unclaimed Balances written back 0.37 0.36
Provisions no longer required written back 3.05 3.33
Royalty Income — 0.33
Others * 11.49 10.62
(includes rent and other recovery of services from Group Companies)
Total 38.80 22.74
* Income Tax deducted at source 0.51 0.67
SCHEDULE 11 : INCOME FROM INVESTMENTS
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
OTHER INCOME
Dividends :
Long Term Investments
Other than Trade Investments * 0.19 0.19 0.18 0.18
Surplus on Sale of Investments :
Non-Trade
Long Term Investments (Refer Note 10 a in Schedule 19) 505.51 –
Current Investments 0.03 505.54 0.03 0.03
Total 505.73 0.21
* Income Tax deducted at source – 7.14
43
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 12 : MATERIAL, MANUFACTURING AND OPERATING EXPENSES
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
A. Raw Material & Components ConsumedOpening Stock 72.60 65.14Add : Purchases 861.14 673.50
933.74 738.64Less : Closing Stock 85.80 847.94 72.60 666.04
B. Finished & Trading Goods and Work-in-progress consumedOpening StockFinished & Trading Goods 24.07 32.93Work-in-Progress 7.59 6.85
31.66 39.78Add : Purchases 59.82 64.21Less : Capitalised — 11.77
91.48 92.22Less : Closing StockFinished & Trading Goods 23.68 24.07Work-in-Progress 4.93 62.87 7.59 60.56
Material Consumed 910.81 726.60Excise duty on increase/(decrease) in stock of finished goods (0.31) 0.03Stores, Spares and Tools 19.67 14.45Power and Fuel 25.51 24.08Repairs to Building 3.45 5.08Repairs to Machinery 9.74 9.89Water 0.01 0.01
Total 968.88 780.14
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
NOTES :1. Company’s own manufactured spare parts have been
classified under trading goods.2. Consumption includes : Adjustment for previous year 0.11 –
: Inventory write off – 0.24
SCHEDULE 13 : PERSONNEL
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Salary, Wages and Bonus 135.63 132.61Contribution to Gratuity Fund 7.74 5.17Contribution to Provident Fund and other Funds 12.59 42.66Staff Welfare Expenses 29.83 29.29
Total 185.79 209.73
ESCORTS LIMITED
44
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 14 : SALES AND ADMINISTRATION EXPENSES
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Erection & Servicing 0.16 0.19
Warranties 5.64 6.38
Rent (Net) 4.50 4.88
Rates and Taxes 1.27 1.17
Insurance 5.59 4.37
Bank and Finance Charges 17.86 29.40
Travelling & Conveyance 16.74 16.01
Printing & Stationery 2.09 2.22
Postage, Telegrams and Telephones 5.15 5.17
Repairs and Maintenance 6.30 5.54
Audit Fee & Legal Expenses 7.62 7.95
Entertainment 0.50 0.61
Commission, Discount and Brokerage 32.23 42.10
Advertisement 15.79 14.55
Royalty 4.58 4.06
Packing, Freight & Forwarding 36.35 27.73
Sales & Purchase Tax 2.87 1.01
Directors Fee & Commission 0.04 0.03
Loss on Sale of Assets (Net) — 2.56
General 11.48 8.33
Exchange variation (Net) 4.45 2.53
Provision for diminution in value of Fixed Assets — 1.04
Total 181.21 187.83
Period ended Period ended
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
NOTES :1. Audit Fee and Legal Expenses include payments/provisions to Auditors for :
(a) Audit Fee 0.28 0.28
(b) Tax Audit Fee 0.08 0.08
(c) In Other Capacity
Limited review of quarterly results 0.19 0.15
Certification and Other Services 0.08 0.08
(d) Service Tax 0.06 0.05
(e) Out of Pocket Expenses 0.02 0.02
2. Cost Audit Fee 0.02 0.01
3. General includes Charity & Donations 0.10 –
4. Sales & Administration Expenses include Lease Charges 0.38 0.13
45
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 15 : INTEREST
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Interest Expenses on :
Fixed Period Loans and Debentures 102.67 92.81
Others 46.71 149.38 36.19 129.00
Less : Interest Income *
On Loans to Group Companies 6.04 8.19
Others (includes interest on income tax refunds, housing loans 1.55 7.59 19.15 27.34
to employees and dealer overdues etc.)
Total 141.79 101.66
* Income tax deducted at source 0.30 2.00
SCHEDULE 16 : AMORTISATION OF MISCELLANEOUS EXPENDITURE
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Voluntary Retirement Scheme 4.95 8.16
Miscellaneous Expenditure written-off 4.14 4.47
Total 9.09 12.63
SCHEDULE 17 : LOSS ON SALE, PROVISION FOR DIMINUTION IN INVESTMENTS
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Provision for diminution in value of investments 137.06 67.04
Loss on sale of Investments – 67.98
Less : Provision created in earlier years 4.30 63.68
Provision for Doubtful Debts 49.64 7.68
Provision for Doubtful Advances 45.59 127.11
Provisions for Doubtful Loans – 12.93
Provision for Obsolescence of Inventory 4.05 2.13
Amounts written off 13.35 3.31
Less : Provision created in earlier years 6.67 6.68 0.71 2.60
243.02 283.17
Less : Assignment of Subordinated Bond 88.11
Total 243.02 195.06
ESCORTS LIMITED
46
SCHEDULE 18 : SIGNIFICANT ACCOUNTING POLICIES
1. ACCOUNTING CONVENTIONThe financial statements are prepared under the historical cost convention in accordance with applicable accounting standards andrelevant provisions of the Companies Act, 1956.
2. FIXED ASSETS AND DEPRECIATION & AMORTISATIONi) Tangible
Fixed assets are stated at cost or at replacement cost in case of revaluation, less accumulated depreciation.
Depreciation & Amortisationa. Depreciation on Plant and Machinery is provided on Straight Line Method.
b. Depreciation on all other Fixed Assets is calculated on the basis of Diminishing Balance Method at the rates prescribed in ScheduleXIV of the Companies Act, 1956 except Leasehold Land which is amortised over the lease period.
c. The depreciation on assets acquired/sold/discarded/demolished during the year is provided from/upto the month the asset iscommissioned/sold or discarded.
d. Leasehold Improvements are written off over a period of six years or lease period, whichever is less.ii) Intangible
In accordance with AS 26- Intangible Assets are valued at cost less accumulated amortisation and any impairment losses.a. Prototypes including work-in-progress developed during Research and Development and advances given for tooling are written off
over a period of four years.b. Technical know-how fee and expenditure on major Software products is written off over a period of six years.
3. IMPAIRMENT OF ASSETSImpairment is ascertained at each Balance Sheet date in respect of Cash Generating Units for which any indication of any possibleimpairment exists. An impairment loss is recognised if the carrying amount of assets of a Cash Generating Unit exceeds its recoverableamount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated futurecash flows are discounted to their present value based on an appropriate discount rate.
4. INVENTORY VALUATIONRaw Material and Components, Stores and Machinery Spares are stated at lower of cost and net realisable value.
Loose Tools are stated at cost or under.
Work-in-Progress, Finished and Trading Goods/Spare Parts are stated at lower of cost and net realisable value.
In determining the cost of Raw Materials and Components, Tools, Jigs and Dies, Stores and Machinery Spares Weighted Average CostMethod is used while in the case of Trading goods FIFO Method is used.
Work-in-Progress and Finished Goods include cost of conversion and other costs incurred in bringing the Inventories to their presentlocation and condition.
5. RETIREMENT BENEFITSThe liability on account of Superannuation and Gratuity is provided on the basis of actuarial valuation at the year end.
6. LEAVE ENCASHMENTThe provision in accounts for leave encashment benefit to employees is based on actuarial valuation at the year end.
7. FOREIGN EXCHANGE FLUCTUATIONTransactions in foreign currency are recorded at the exchange rates prevailing at the dates of the transactions. Gains/losses arising outof fluctuation in exchange rates on settlement are recognised in the Profit & Loss Account, except in case of fixed assets where such gains/losses are adjusted to the carrying cost of the respective assets.
Foreign currency monetary assets and liabilities are restated at the exchange rate prevailing at the year end and the overall net gain/lossis adjusted to the Profit & Loss Account, except in case of liabilities relating to acquisition of fixed assets which are adjusted to the carryingcost of the respective assets.
In case of Forward Exchange Contracts, the difference between the forward rate and the exchange rate at the date of transaction isrecognised in the Profit & Loss Account over the life of the contract, except in case of liabilities relating to acquisition of fixed assets whichare adjusted to the carrying cost of the respective assets.
8. INVESTMENTSInvestments intended to be held for less than one year are classified as current investments and are carried at lower of cost or market value.All other investments are classified as long term investments and are carried at cost. Investments in foreign companies are stated at theexchange rates prevailing on the date of investment.
A provision for diminution is made to recognise a decline other than temporary in the value of long term investments.
9. REVENUE RECOGNITIONDividend is taken on accrual basis, if declared/received by the time of finalisation of the accounts.
10. BORROWING COSTSBorrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such assets uptothe date the assets are ready for its intended use. All other borrowing costs are recognised as an expense in the year in which they areincurred.
11. DEFERRED REVENUE EXPENDITUREDevelopment expenditure represents Project related development expenditure/business process re-engineering consultancy and marketresearch. Such expenditure is written off over a period of six years.
Advertisement expenses incurred for brand development and promotion are written off over a period of three years.
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
47
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT
2004-2005 2003-2004Rs. Crores Rs. Crores
1. Computation of Net Profit in accordance with Section 198 of theCompanies Act, 1956 for calculation of Managerial RemunerationProfit/(Loss) as per Profit & Loss Account 31.02 (421.74)Add : Directors remuneration including Perquisites 0.52 0.81
Directors Sitting Fee 0.04 0.03
31.58 (420.90)Less : Profit/(Loss) on Sale/Provision for diminution in the value of Investments,
Loans & Advances to Group Companies 333.00 (185.02)Profit/(Loss) on Sale of Other Investments (net) 0.03 (0.04)Profit/(Loss) on Sale of Assets 6.30 339.33 (2.56) (187.62)
Net Profit/(Loss) for Section 198 of the Companies Act, 1956 (307.75) (233.28)
Maximum remuneration payable to the Managing/Wholetime Directors – –
Actual remuneration paid to the Managing/Wholetime Directors being 0.52 0.81minimum remuneration as per Schedule XIII of the Companies Act,1956 for the period 2004-05
2. Payments made to Directors :
(a) Salaries 0.52 0.81(b) Commission – –
(c) Other perquisites – –
(d) Directors’ Sitting Fee 0.04 0.03
3. Expenses pertaining to previous years :Personnel – Rs. 40,110Sales and Administration 7.13 8.73Operating 0.02 0.01Interest 3.65
4. Income pertaining to previous years :Commission 0.09 –
5. Miscellaneous expenditure (to the extent not written off or adjusted) represents :
(a) Development expenditure 4.14 7.25Add : Additions during the year 1.08 –Less : Written off during the year 2.66 2.56 3.11 4.14
(b) Payments under Voluntary Retirement Scheme 10.66 11.46Add : Additions during the year 2.07 7.36Less : Written off during the year 4.95 7.78 8.16 10.66
Payment under Voluntary Retirement Scheme to the direct / indirect employees is written off over a period of five years.
Upfront & Structuring fees are written off during the term of the respective loan.
12. DEFERRED TAXDeferred Tax is recognised, subject to consideration of prudence, on timing differences, representing the difference between the taxable incomeand accounting income that originated in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets andliabilities are measured using tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date.
13. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETSProvisions are recognised for liabilities that can be measured only by using a substantial degree of estimation, ifa) the Company has a present obligation as a result of past event,
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of obligation can be reliably estimated.
Reimbursements expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that thereimbursement will be received.
Contingent liability is disclosed in the case ofa) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation
b) a possible obligation, of which the probability of outflow of resources is remote.
Contingent Assets are neither recognised nor disclosed.
Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.
SCHEDULE 18 : SIGNIFICANT ACCOUNTING POLICIES (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
ESCORTS LIMITED
48
(c) Upfront Fee 0.24 1.60Add : Additions during the year 9.75 –Less : Written off during the year 1.49 8.50 1.36 0.24
18.84 15.04
In Rupees In Rupees
6. Profit & Loss Account of Agricultural business is as follows :Opening Stock 30,000.00 –Expenses 602,074.00 347,762.00Sales and Other Income 334,658.00 321,046.00Closing Stock – 30,000.00
Net Profit/(Loss) (297,416.00) 3,284.00
7. The Company has taken endowment / key-man insurance policies on the life of its Senior Executives including the Managing Directors.Some of these policies have been assigned to the executives and Managing Directors. The consideration for such assignment is theguaranteed surrender value as certified by the Life Insurance Corporation of India. The Company has been advised that such surrendervalue is adequate consideration for the transfer and on receipt thereof, there is no benefit accruing as remuneration under the CompaniesAct, 1956 or the Income Tax Act, 1961.
8 . a) During the previous period ended 30th June, 2004, the Company had entered into an agreement to divest its entire holding of equityin the telecom subsidiary Companies i.e. Escotel Mobile Communications Limited (EMCL) and Escorts Telecommunications Limited(ETL). The sale transaction in case of EMCL was completed on 10th June, 2004 but the ETL transaction is yet to be completed. Thenet loss of Rs. 177.61 crores arising on account of the loss of investment as well as for loans given to the above two mentionedsubsidiaries, was provided during the previous period. The loss is after taking into account the gain of Rs. 88.11 crores arising fromthe assignment of the shareholders’ subordinated debt by the joint venture partner in favour of Escorts Limited. The consequentialaggregate shareholders’ subordinated debt of Rs. 175.74 crores is redeemable in January, 2014. However, the borrower EMCL hasan option of early redemption at a discount rate of 10.50% per annum and the Company has a put option in January 2010. ThisSubordinated Debt (Bond) of Rs. 175.74 crores is included in ‘Investments’ (Schedule 6). The difference between the book value ofRs. 175.74 crores and the realisable value (NPV) of Rs. 117.87 crores in January 2010 has been provided during the current period.
b) During the period, the Company has assigned the above referred Bond of Idea Mobile Communication Limited (Idea) to UTI BankLtd. (Bank) to avail financial assistance. Idea has a call option exercisable at any time. On payment by Idea to the Bank, theCompany will receive any surplus after deducting dues to Bank on account of loan amount, contingent liabilities to the extent set offby Idea and any outstanding interest / penal interest and charges. The Bank has also retained a cash margin whose book value ofRs 9.45 crore is included in ‘fixed deposits with Scheduled Banks’ (pledged) in Schedule 7.
9. Consequent to an agreement dated 31st March, 2000 between the Company and Hughes Network Systems (HNS), the joint venturepartner of the company in Hughes Escorts Communication Limited (HECL), and ICICI Bank Ltd. (ICICI), the Company sold 34,50,000equity shares of HECL to Escorts Motors Limited (EML) HNS and ICICI thereafter subscribed to the equity share capital of EML equally tohold 98% of its total equity share capital. Under the terms of the agreement, the Company had given an assurance to HNS and ICICI ofa minimum return compounded annually for a period of four years .Subsequent to 31st March 2004, the Company has in terms of earlier agreement agreed to purchase the 49% holding in EML from ICICI and hadadvanced Rs. 68 crores out of which Rs. 31.25 crores has been provided as diminution in the value of proposed investment, being the differentialin excess of the original investment made by ICICI. The transfer of the shares in favour of the Company is awaited pending final settlement with ICICI.The amount of Rs. 68 crores remains grouped under ‘Advances recoverable in cash or kind’ in Schedule 8 ‘Loans & Advances’.Discussions are in progress with HNS for a final settlement and the assurance of return has ceased accruing on 31st March 2003., as mutually agreed.
10. a) During the period, the Company had sold its entire shareholding in Escorts Heart Institute & Research Centre Limited (EHIRCL) forconsideration of Rs. 520.00 crores vide Sale Purchase Agreement dated 25th September 2005. The sale proceeds have beenreceived, excepting for Rs. 85.08 crores which has been retained in an Escrow Account, awaiting fulfillment of certain conditions.
The Hon’ble Delhi High Court has ordered status quo, on a petition filed in this matter. The Company has recognised the sale in theseAccounts and has also obtained legal opinion, which has advised that there is no adverse effect on the sale transaction, in view ofthe High Court Order.The net income from divestment as appearing in Schedule 11 is net of Rs. 12.89 crores paid towards professional charges incurredin the sale deal.
b) The tax authorities had raised a demand of tax amounting to Rs 52.33 crores and interest thereon amounting to Rs. 29.16 crores onEHIRCL which is under appeal. The Company has undertaken vide the above mentioned sale agreement to indemnify the purchaserto the extent of Rs. 65 crores and one-third of any excess in case the appeal is decided against the Company.
11. Deferred TaxThe deferred tax liability as at 30th September, 2005 comprises of the following :
(Rs. Crores)Deferred tax (Charge)/credit Deferred tax assets/
Particulars assets/(liabilities) during the period (liabilities) as at as at 01.07.2004 30.09.2005
Depreciation (81.77) 12.30 (69.47)Deferred revenue expenditure (4.02) 2.03 (1.99)Disallowance u/s 43B 17.50 4.64 22.14Provision for Doubtful Debts/Loans & Advances 61.31 62.27 123.58Unabsorbed Loss 38.50 (34.13) 4.37Total 31.52 47.11 78.63
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
2004-2005 2003-2004Rs. Crores Rs. Crores
49
12. Related party disclosures (as identified and certified by the management)
Related party disclosures as required under Accounting Standard on “Related Party Disclosures” issued by the Institute of CharteredAccountants of India are given hereunder:
(i) Subsidiary CompaniesDomestic
Escorts Construction Equipment Limited Esconet Services LimitedEscorts Automotives Limited Cellnext Solutions LimitedEscorts Securities Limited iServ India Solutions Private LimitedEscorts Asset Management Limited Automatrix India Private LimitedEscorts Healthcare Services Limited Escorts Telecommunications LimitedEscorts Heart and Super Speciality Institute Limited, Jaipur* Escorts Telecom Services LimitedEscorts Hospital & Research Centre Limited* IFS Solutions India Pvt. LimitedEscorts Heart Institute & Research Centre Limited* Escosoft Technologies LimitedEscorts Heart and Super Speciality Institute Limited, Amritsar* CA Escosoft LimitedEscorts Heart Centre Limited, Kanpur* Escotoonz Entertainment Private Limited(*subsidiaries upto 28th September 2005)
OverseasEsoft (Mauritius) Holdings Limited Escosoft Singapore Pte. LimitedEscosoft Technologies (UK) Private Limited Escorts Agri Machinery Inc.Escosoft Technologies (USA) Limited Farmtrac Escorts Europe Sp. z.o.oFarmtrac North America LLC, USA Beaver Creeks Holdings LLC.(formerly Long Agri Business LLC, USA)
(ii) Joint Ventures and Associates
DomesticCarraro India Limited Escorts Motors LimitedHughes Escorts Communications Limited Escorts Consumer Credit LimitedEscotrac Finance & Investments Private LimitedEscorts Finance Investment & Leasing Private Limited
(iii) Key Management personnel (Whole-time Directors)
Mr. Rajan Nanda
Mr. Nikhil Nanda (upto 16th August 2005)
(iv) Related Party transactions - Refer Annexure - I
13. Earnings per Share (EPS) Period ended Period ended
2004-05 2003-2004
(a) Net Profit after tax (Rs. crores) 39.09 (313.54)
(b) Total number of Equity Shares 7,22,32,240 7,22,32,240
(c) Basic and diluted earnings per share (in rupees) 5.41 (43.41)
14. The Company gives warranties on certain products and undertakes to repair or replace them if these fail to perform satisfactorily during thewarranty period which is 12 months or 1500 hours usage whichever is earlier. An amount of Rs 1.13 crores has been provided during the periodended 30th September 2005. Such provision represents the amount of expected cost of meeting the obligations of such rectification/replacement.The timing of the outflows is expected to be within a period of one year.
15. The list of Small Scale Industrial Undertakings to whom the Company owes any sum which is outstanding for more than 30 days during thecurrent year are given in Annexure - II.
16. Clause 32 disclosure - Please refer Annexure - III
17. Accounting for Leases (AS-19)
Details as per Annexure - IV
18. Figures have been rounded off to the nearest lac rupees and Actuals which are less than Rs. 50,000 are shown in brackets.
19. Current accounting period is for 15 months from July 1, 2004 to September 30, 2005 and is comparable with the previous period.
Previous year figures have been regrouped wherever necessary to conform to current year classification.
SCHEDULE 18 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
ESCORTS LIMITED
50
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
(iv) Related Party Transactions :
TRANSACTIONS WITH SUBSIDIARIES
Nature of Transactions Escorts Escorts Escorts iServ Escorts Escosoft Esconet Cellnext Escorts Automotives Construc- Hospital & India Heart Techno- Services Solutions Securities
Ltd. tion Research Solutions Institute & logies Ltd. Ltd. Ltd.Equipment Centre Ltd. Research Ltd.
Ltd. Ltd. Centre(2) Ltd.
(2)
Sale of goods – 13.14 – – – – – – –– (5.54) – – – – – – –
Rendering of services (Income) 0.05 1.15 0.36 – 0.43 – – 0.01 0.04 (0.07) (1.16) (0.27) – (0.36) (0.02) – – (0.04)
Rent Income – 0.81 0.00 – 0.03 – – – –– (0.81) (0.00) (0.01) (0.03) (0.12) – – –
Interest Income 5.53 – – – – 0.45 – – – (7.32) – – – – (0.17) (0.70) – –
Purchases of goods – 1.47 – – – – – – –– (0.49) – – – – – – –
Receiving of services – – 0.04 – – 0.44 – – –– – (0.21) (0.08) (0.00) (0.45) – – –
Financial transactions a) Interest expense – – – – 1.90 – – – –
– – (0.17) – (3.66) – – – – b) Discounting charges paid – – – – – – – – –
– – – – – – – – –Management contracts including fordeputation of employees 0.10 – 0.06 – 0.74 0.22 – 0.45 –
– – (0.09) – (0.40) (0.98) – – –Fixed assets
Purchase of Fixed Assets – – – – – – – – –– – – (0.01) – – – – –
Sale of Fixed Assets – – – – – – – – –Leasing or hire purchase arrangements – – – – – – – – –
InvestmentsBalance as at 01.07.2004 23.66 70.81 – – 1.60 15.05 69.30 – 1.20Purchased during the period – 0.19 – – – – – – –
– – – – – (14.30) – – –Sold during the period – – – – 1.60 – – – –
– – (16.00) – – – – – –Balance as at 30.09.2005 23.66 71.00 – – – 15.05 69.30 – 1.20
(23.66) (70.81) – – (1.60) (15.05) (69.30) – (1.20)Loans/ICD Given
Balance as at 01.07.2004 68.41 – – – – – – – –Given/Additions during the period – – – – – – – – –
(4.27) – – – – – (0.06) – –– – – – – –
Returned/Adjusted during the period – – – – – – – – –(0.99) (21.59) – – – – (14.30) – –
Balance as at 30.09.2005 68.41 – – – – – – – –(68.41) – – – – – – – –
AdvancesGiven (incl. Running accounts)Balance as at 01.07.2004 8.68 0.04 0.10 0.00 0.00 2.75 5.90 0.06 0.86Additions during the period 5.71 0.44 0.57 0.14 17.12 4.11 0.00 0.48 0.04
(7.42) (0.13) (0.63) (0.01) – (1.84) (0.84) (0.01) (0.04)Reductions/Adjustmentsduring the period 0.18 0.42 0.67 0.01 17.12 0.94 0.84 0.27 0.14
(5.72) (3.26) (0.73) (0.02) – (0.95) (0.95) – (0.03)Balance as at 30.09.2005 14.21 0.06 – 0.13 – 5.92 5.06 0.27 0.76
(8.68) (0.04) (0.10) (0.00) – (2.75) (5.90) (0.06) (0.86)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
51
Annexure - I
(Rs. Crores)
Escorts Escorts Escotel Escorts Escorts Farmtrac IFS Escorts Farmtrac Escotoonz TotalAssets Telecom Mobile Telecomm– Agri Escorts Solutions Healthcare North Entertain-
Management Services Communi- unications Machinery Europe India Services America mentLtd. Ltd. cations Ltd. Inc. Sp z.o.o Pvt. Ltd. Ltd. LLC, USA Pvt. Ltd.
Ltd.* (formerlyPol MotSpolkaz.o.o.)
– – – – 21.50 14.00 – – – – 48.64– – – – – (15.12) – – – – (20.66)
0.01 – – – – – – – – – 2.05– – (0.25) – – – – – – – (2.17)– – – – – – – – – 0.16 1.00– – – – – – – – – (0.03) (1.00)– – – – – – – – – 0.05 6.03– – – – – – – – – (0.00) (8.19)– – – – – – – – – – 1.47– – – – – – – – – – (0.49)– – – – – – 0.07 – – – 0.55– – – – – – (0.08) – – – (0.82)
– – – – – – – – – – 1.90– – – – – – – – – – (3.83)– – – – – – – – – – –– – – – – – – – – – –
– – – – – – – – – – 1.57– – (0.92) – – – – – – – (2.39)
– – – – – – – – – – –– – – – – – – – – – (0.01)– – – – – – – – – – –– – – – – – – – – – –
3.00 0.05 – 57.00 41.63 – – 0.05 – – 283.35– – – – 7.65 – – – – – 7.84– – (81.60) – – – – – – (95.90)– – – – – – – – – – 1.60– – (268.26) – – – – – – – (284.26)
3.00 0.05 – 57.00 49.29 – – 0.05 – – 289.60(3.00) (0.05) – (57.00) (41.63) – – (0.05) – – (283.35)
– – – 12.93 – – – – – – 81.34– – – – – – – – – – –– – – (80.00) – – – – – – (84.33)– – – – – – – – –– – – – – – – – – – –– – (87.63) (137.47) – – – – – – (261.98)– – – 12.93 – – – – – – 81.34– – – (12.93) – – – – – – (81.34)
0.07 – – 126.60 – – – – – 0.09 145.150.01 – – 3.19 – – – – – 0.73 32.54
(0.07) – (1.36) (222.36) – – – – – (0.10) (234.81)
0.07 – – 0.10 – – – – – 0.24 21.00(0.05) – (1.59) (101.97) – – – – – (0.01) (115.28)
0.01 – – 129.69 – – – – – 0.58 156.69(0.07) – (0.07) (126.60) – – – – (0.09) (145.22)
ESCORTS LIMITED
52
Advance towards Share Application Money/Purchase of Investments
Balance as at 01.07.2004 – – – – – – – – –Additions during the period – – – – – – – – –
– – – – – – (1.81) – –– – – – – – –
Reductions during the period – – – – – – – – –– – – – – – (1.81) – –
Balance as at 30.09.2005 – – – – – – – – –– – – – – – – – –– – – – – – – –
Receivables / DebtorsBalance as at 01.07.2004 – – – – – – – – –Additions during the period – 18.87 – – – – – – –
– (8.04) – – – – – – –Realizations during the period – 18.78 – – – – – – –
– (14.00) – – – – – – –Balance as at 30.09.2005 – 0.09 – – – – – – –
– – – – – – – – –– – – – – – – –
Borrowings /Loans takenBalance as at 01.07.2004 – – – – 13.50 – – – –Availed during the period – – – – – – – – –
– – (2.50) – (12.50) – – – –Repaid during the period – – – – 13.50 – – – –
– – (2.50) – (21.00) – – – –Balance as at 30.09.2005 – – – – – – – – –
– – (2.50) – (13.50) – – – –Payables
Balance as at 01.07.2004 – 1.78 0.03 0.03 0.27 – – – –Additions during the period – – 0.02 – – 0.07 – – –
(1.78) (0.27) (0.12) (3.89) (0.07) – – –Payments made during the period – 1.78 0.05 – 0.27 0.07 – – –
(0.14) (0.28) (0.10) (3.93) (0.07) – – –Balance as at 30.09.2005 – – – 0.03 – 0.00 – – –
(1.78) (0.03) (0.03) (0.27) – – – –Guarantees 27.06 – – – 5.00 – – –
(19.30) – – – (3.00) – –Provisions (Debts/Loans/Advances/Deposits/Investments)
Balance as at 01.07.2004 – – – – – – 10.04 – –Additions during the period 13.66 – – 0.13 – 16.91 52.60 – –
– – – – – – (10.04) – –Write off out of existing Provisions – – – – – – – – –
– – – – – – – – –Write back of Provisions – – – – – – – – –
– – – – – – – – –Balance as at 30.09.2005 13.66 – – – – 16.91 62.64 – –
– – – – – – (10.04) – –– – – – – – – –
Amounts directly written off – – – – – – – – –– – – – – – – – –
NOTES :
1. The previous year figures have been re-classified to the extent these pertain to Farmtrac North America LLC, USA (formerly Long Agri Business LLC , USA)and Escotoonz Entertainment Private Limited due to change in relationship.
2. Subsidiary upto 28th September 2005. However, full amount of income and expense transactions have been shown in order to make them comparable with previous year figures.
3. Figures in brackets pertain to previous period.
TRANSACTIONS WITH SUBSIDIARIES (Contd.)
Nature of Transactions Escorts Escorts Escorts iServ Escorts Escosoft Esconet Cellnext Escorts Automotives Construc- Hospital & India Heart Techno- Services Solutions Securities
Ltd. tion Research Solutions Institute & logies Ltd. Ltd. Ltd.Equipment Centre Ltd. Research Ltd.
Ltd. Ltd. Centre(2) Ltd.
(2)
SCHEDULE 18 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
53
– – – – – – – – – – –– – – – – – – – – – –– – – – – – – – – – (1.81)– – – – –– – – – – – – – – – –– – – – – – – – – – (1.81)– – – – – – – – – – –– – – – – – – – – – –
– – – – 0.02 10.91 – – 21.40 – 32.33– – – – 2.15 14.28 – – 76.87 – 112.17– – – – – (15.12) – – (56.08) – (79.24)– – – – 0.23 10.33 – – 43.85 – 73.19– – (0.01) – – (12.73) – – (63.54) – (90.27)– – – – 1.94 14.86 – – 54.42 – 71.31– – – – (0.02) (10.91) – – (21.40) – (32.33)
– – – – – – – – – – 13.50– – – – – – – – – – –– – – – – – – – – – (15.00)– – – – – – – – – – 13.50– – – – – – – – – – (23.50)– – – – – – – – – – –– – – – – – – – – – (16.00)
0.01 – – – – – 0.07 – – – 2.19– – – – – – 0.07 – – – 0.16
(0.01) – – – – – (0.08) – – – (6.22)– – – – – – 0.14 – – – 2.31– – (0.06) – – – (0.00) – – – (4.58)
0.01 – – – – – 0.00 – – – 0.04– – – – – – (0.07) – (0.01) – (2.19)– – – – – – – – – – 32.06
(27.50) – – – – – – (49.80)
– – – – – – – – – 10.04– – – – – – – – – 83.30– (197.04) – – – – – (207.08)– – – – – – – – – –– – – – – – – – –– – – – – – – – – –– – – – – – – – –– – – – – – – – – – 93.21– – – (197.04) – – – – – (207.08)
– – – – – – – – – –– – – – – – –
(Rs. Crores)
Escorts Escorts Escotel Escorts Escorts Farmtrac IFS Escorts Farmtrac Escotoonz TotalAssets Telecom Mobile Telecomm– Agri Escorts Solutions Healthcare North Entertain-
Management Services Communi- unications Machinery Europe India Services America mentLtd. Ltd. cations Ltd. Inc. Sp z.o.o Pvt. Ltd. Ltd. LLC, USA Pvt. Ltd.
Ltd.* (formerlyPol MotSpolkaz.o.o.)
Annexure - I (Contd.)
ESCORTS LIMITED
54
TRANSACTIONS WITH JOINT VENTURES (Rs. Crores)
Nature of Transactions Escorts Escotrac Carraro Escorts Hughes TotalFinance Finance & India Motors Escorts
Investment & Investment Ltd. Ltd. Communi–Leasing Pvt. Ltd. cations Ltd.
Ltd.
Sale of goods – – 0.60 – – 0.60– – (0.21) – – (0.21)
Rendering of services (Income) – 0.01 – – – 0.01– (0.02) – – (0.10) (0.12)
Dividend Income – – – – 0.19 0.19– – – – (0.18) (0.18)
Purchases of goods – – 20.56 – – 20.56– – (14.98) – – (14.98)
Receiving of services – – – – – –
Management contracts includingfor deputation of employees – – – – – –
InvestmentsBalance as at 01.07.2004 83.82 98.48 19.60 1.50 3.76 207.16Purchased during the period – – – – – –
(25.00) (25.00) – – – (50.00)Sold during the period – – – – – –
– – – – – –Balance as at 30.09.2005 83.82 98.48 19.60 1.50 3.76 207.16
(83.82) (98.48) (19.60) (1.50) (3.76) (207.16)
Loans/ICD GivenBalance as at 01.07.2004 – – – – – –Given/Additions during the period – – – – – –
– – – – – –Returned during the period – – – – – –
(25.00) (25.00) – – – (50.00)Balance as at 30.09.2005 – – – – – –
– – – – – –
Advances Given (incl. Running accounts)Balance as at 01.07.2004 0.00 (0.01) – 0.02 0.09 0.11Additions during the period – – – – – –
– (0.02) – – (0.15) (0.17)Reductions during the period 0.00 0.00 – – 0.02 0.03
(0.00) (0.01) (0.34) – (0.12) (0.47)Balance as at 30.09.2005 – (0.01) – 0.02 0.07 0.08
(0.00) 0.01 – (0.02) (0.09) (0.11)
Receivables/DebtorsBalance as at 01.07.2004 – – – – – –Additions during the period – – 0.72 – – 0.72
– – (0.21) – – (0.21)Realizations during the period – – 0.72 – – 0.72
– – (0.21) – – (0.21)Balance as at 30.09.2005 – – – – – –
– – – – – –
PayablesBalance as at 01.07.2004 – 0.02 0.15 – – 0.17Additions during the period – – 20.56 – – 20.56
– (0.02) (14.98) – – (15.01)Payments made during the period – – 6.01 – – 6.01
– – (16.76) – – (16.76)Balance as at 30.09.2005 – 0.02 14.70 – – 14.73
– (0.02) (0.15) – – (0.17)
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - I (Contd.)
55
TRANSACTIONS WITH JOINT VENTURES (Contd.) (Rs. Crores)
Nature of Transactions Escorts Escotrac Carraro Escorts Hughes TotalFinance Finance & India Motors Escorts
Investment & Investment Ltd. Ltd. Communi-Leasing Pvt. Ltd. cations Ltd.
Ltd.
TRANSACTIONS WITH ASSOCIATES(Rs. Crores)
Nature of Transactions Escorts Auto EscortsComponent Finance
Ltd. 1 Ltd. 1 Total
Sale of goods – – – – – –
Rendering of services (Income) – – – (0.16) (0.12) (0.28)
Rent Income – – – – (0.03) (0.03)
Purchases of goods – – – (0.12) – (0.12)
Receiving of services – – – (0.47) (0.07) (0.54)
Financial transactions a) Interest expense – – –
– (0.84) (0.84) b) Discounting charges paid – – –
– (2.50) (2.50) Management contracts including for deputation of employees – – –
(0.35) – (0.35)Fixed assets
Leasing or hire purchase arrangements – – – – (0.09) (0.09)
InvestmentsBalance as at 01.07.2004 – – –Purchased during the period – – –
– – –Sold/Adjusted during the period – – –
(0.40) (13.51) (13.91)Balance as at 30.09.2005 – – –
– – –Advances Given (incl. Running accounts)
Balance as at 01.07.2004 – (0.01) (0.01) Additions during the period – – –
(1.43) (0.69) (2.12)Returned/Adjusted during the period – – –
(1.83) (2.58) (4.41)
Provisions (Debts/Loans/Advances/Deposits/Investments)
Balance as at 01.07.2004 – – – – 0.07 0.07Additions during the period – – – 31.25 – 31.25
– – – – – –Write off out of existing Provisions – – – – – –
– – – – – –Write back of Provisions – – – – – –
– – – – – –Balance as at 30.09.2005 – – – 31.25 0.07 31.32
– – – – (0.07) (0.07)
Amounts directly written off – – – – – – – – – – – –
NOTES:1. Figures in brackets pertain to previous period
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - I (Contd.)
ESCORTS LIMITED
56
Balance as at 30.09.2005 – – – – 0.01 0.01
Receivables / DebtorsBalance as at 01.07.2004 – – – Additions during the period – – –
(0.35) – (0.35)Realizations during the period – – –
(0.46) – (0.46)Balance as at 30.09.2005 – – –
– – –Payables
Balance as at 01.07.2004 – – – Additions during the period – – –
– (161.30) (161.30)Payments made during the period – – –
– (185.52) (185.52)Balance as at 30.09.2005 – – –
– – –Provisions (Debts/Loans/Advances/Deposits)
Balance as at 01.07.2004 – – – Additions during the period – – –
– – –Write off out of existing Provisions – – –
– – –Write back of Provisions – – –
– – –Balance as at 30.09.2005 – – –
– – –Amounts directly written off – – –
– – –
NOTES :
1. Ceased to be a related party in 2004-05. Hence disclosures for current period not applicable.2. Figures in brackets pertain to previous period.3. The previous year figures have been re-classified to the extent these pertain to Farmtrac North America LLC, USA (formerly Long Agri
Business LLC, USA) and Escotoonz Entertainment Private Limited due to change in relationship.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (Rs. Crores)
Nature of Transactions Mr. Rajan Nanda Mr. Nikhil Nanda(1) Total
Managerial Remuneration Paid 0.25 0.27 0.52(0.41) (0.40) (0.81)
NOTES :
1. Key Management Personnel upto 16th August 2005.
2. Figures in brackets pertain to previous period.
TRANSACTIONS WITH ASSOCIATES (Contd.) (Rs. Crores)
Nature of Transactions Escorts Auto EscortsComponent Finance
Ltd. 1 Ltd. 1 Total
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - I (Contd.)
57
Sr. Name of SSI UndertakingsNo.
Sr. Name of SSI UndertakingsNo.
1 Alhind Metal Industries
2 Allena Auto Industries Private Limited
3 Amar Udyog
4 Amritsar Machine Tools
5 Auto Tech Engineers
6 Centrifugal Casting Company
7 Chandra Automotive Components
8 D P Auto Industries
9 Delight Pressings
10 Duro Engineering Works
11 Elites Engineers & Manufacurers
12 Frienz Auto Pvt.Ltd
13 G.K. Machine Tools
14 Globe Engg. Corporation
15 Goyal Engg. Corporation (India)
16 Grownex Engg. Works
17 H.S. Machine Tools Industry
18 Harness India Private Limited
19 Haryana Agro Engg. Products
20 Hi-Lux Automotive Private Limited
21 Industrial & Farm Equipment Company
22 International Automotive Components
23 J. B. Engineering Works
24 J. K. Engineers
25 J.S.Industries
26 Jagjit Engineering Works
27 Jagjit Industries
28 Jai Industries
29 Jayem Auto Industries Private Limited
30 Karm Engg. Works
31 Kochar Agro Industries P Limited
32 Luxmi Automats
33 Metal Pressings & Engg. Works
34 Micro Engg. Corporation
35 Micron Precision Screws Limited
36 Modern Machine Tools
37 New Pragati Udyog
38 Parykam Auto Private Limited
39 Pee Cee Engineers
40 Pertap Engineering Works
41 Piplani Enterprises
42 Pratap Enterprise
43 Precision Castings
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
44 Precision Engg. Industries
45 Preet Industrial Corporation
46 Presto Machine Tools
47 Pritika Auto Products Private Limited
48 R.Engg. & Fabrication Works
49 Rajan Engg. Works
50 Rajesh Engg. Works
51 Rajesh Engineers Pvt. Ltd.
52 Rana Enterprises
53 Relex Automats
54 Remco Electric Syndicate
55 Royal Tools (India)
56 S. K. Tools
57 Sankla Castings
58 Sankla Engineering Works
59 Sarna Engineering Works
60 Sawan Industries
61 Sethi Industrial Corporation
62 Shakti Auto Valves & Engg.Company Private Limited
63 Shivon International
64 Shyam Alloys Private Limited
65 Shyam Metals
66 Singh Associates P Limited
67 Sneh Enterprises
68 Sood Associates
69 Steerwels
70 Sumesh Engg. Works
71 Sunika Bee Parkash
72 Techno Spring Industries
73 Technoforge (India)
74 The General Rubber Co. P Ltd.
75 United Metal & Plastics Private Limited
76 Vallabh Industries
77 Veekay Machine Tools
78 Verma Technico
79 Vijay Engg. & Metal Works
80 Vijay Metal Forgings Private Limited
81 Vikas Forging Pvt. Ltd.
82 Vikram Fabricators
83 Vishwakarma Automotive Private Limited
84 Wesco Auto Prod. (I) Private Limited
85 Yogdaan Engineers
86 Yogesh Engineering Works
The list of Small Scale Industrial Undertakings (SSI) to whom the company owes any sum which is outstanding for more than 30 days as at30th September, 2005 are given hereunder :
Annexure - II
ESCORTS LIMITED
58
(Rs. Crores)
Amount of loan/advances Amount where there is in nature of loan no repayment Amount where there is
outstanding schedule no interest
Loanees As on Maximum As on Maximum As on Maximum30th Sept. amount 30th Sept. amount 30th Sept. amount
2005 outstanding 2005 outstanding 2005 outstandingduring during during
2004-05 2004-05 2004-05
Subsidiary CompaniesEscorts Automotives Limited 82.16 82.16 82.16 82.16 15.53 15.53
(76.63) (76.63) (76.63) (76.63) (15.53) (16.53)Escorts Construction Equipment Limited – – – – – –
(–) (21.59) (–) (21.59) (–) (21.59)Escotel Mobile Communications Limited # – – – – – –
(–) (87.63) (–) (87.63) (–) (87.63)Escorts Telecommunications Limited## 142.62 142.62 2.58 ## 2.58 2.58## 2.58
(139.53) (139.53) (N.A ##) (–) (N.A##) (–)Esconet Services Limited 5.05 5.90 – – – –
(5.90) (20.11) (–) (–) (–) (–)
AssociatesEscorts Finance Investment &Leasing Pvt. Limited – – – – – –(including Inter corporate Deposit) (–) (25.00) (–) (25.00) (–) (25.00)
Escotrac Finance & Investment Pvt. Limited – – – – – –(–) (25.00) (–) (25.00) (–) (25.00)
Firms/Companies in which Directors are interested – – – – – – (–) (–) (–) (–) (–) (–)
OthersEscorts Employees Welfare Ltd. 2.43 4.43 4.43 4.43 4.43 4.43
(4.43) (4.43) (4.43) (4.43) (4.43) (4.43)Escorts Employees Stock Option – 24.55 – 24.55 – 24.55
(24.55) (24.55) (24.55) (24.55) (24.55) (24.55)
# Ceased to be a subsidiary w.e.f. 10th June 2004 pursuant to divestment of Telecom business.
# # Provisions made in the books for the amounts of Rs. 140.04 crores. Hence disclosures regarding repayment schedule and interestto that extent not relevant. Also refer to Note-8 a in Schedule 19.
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Disclosure pursuant to Clause 32 of the Listing Agreement :
Annexure - III
59
Book Value of Investment
Particulars of Investments by the Loanees By the Loanees Max. amountas on 30th September, outstanding
2005 during 2004-05
A) Loanee - Escorts Telecommunications LimitedEscotel Mobile Communications Limited # – –
(–) (40.55)B) Loanee - Esconet Services Limited
Escorts Construction Equipment Limited (subsidiary)- Preference Shares – 0.19
(0.19) (2.00)Cellnext Solution Limited (subsidiary)- Equity Shares 13.05 13.05
(13.05) (13.05)- Preference Shares 7.50 7.50
(7.50) (7.50)Iserve India Solutions (P) Ltd. (subsidiary)- Equity Shares 11.50 11.50
(11.50) (11.50)- Preference Shares 7.50 7.50
(7.50) (7.50)Automatrix India Private Limited (subsidiary)
- Equity Shares 1.95 1.95(1.95) (1.95)
- Preference Shares 2.85 2.85(2.85) (2.85)
C) Loanee - Escorts Finance Investment & Leasing Pvt. Ltd.Escorts Limited (parent) – –
(–) (67.32)D) Loanee - Escotrac Finance & Investment Pvt. Limited
Escorts Limited (parent) – –(–) (104.75)
Escorts Asset Management Limited (subsidiary) – –(–) (4.98)
Escorts Securities Limited (subsidiary) – –(–) (1.97)
Escosoft Technologies Limited (subsidiary) – –(–) (0.25)
E) Loanee- Escorts Employees Stock Option*Escorts Limited (parent) – 22.55
(22.55) (22.55)
# Ceased to be subsidiary w.e.f. 10th June, 2004 pursuant to divestment of Telecom business* Not a loanee as on 30th September, 2005, hence disclosure is not required.
Disclosure under Accounting Standard-19 (Leases) Annexure-IV
In respect of ‘finance lease’ arrangements for the period 2004-05 :(Rs. Crores)
Furniture & Fixtures Vehicles
Total addition to fixed assets 1.09 0.54(1.91) (1.80)
Assets under finance lease :
Opening original cost of assets 1.22 0.60(1.22) (0.51)
Additions under finance lease – 0.13(–) (0.40)
Deletion during the period 1.22 –(–) (0.31)
Closing Original Cost – 0.73(1.22) (0.60)
Cumulative Depreciation – 0.33(0.74) (0.16)
Net carrying value as on 30th September, 2005 – 0.40(0.48) (0.44)
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - III (Contd.)
ESCORTS LIMITED
60
The details of amounts of minimum lease payments outstanding as on 30th September, 2005 and present value thereof are as under :
(Rs. Crores)
Minimum Lease Present value of minimum Future interest onpayments outstanding lease payments outstanding outstanding lease
payments
– Total amount due 0.26 0.24 0.02(0.92) (0.84) (0.08)
– Due within one year 0.14 0.13 0.01(0.62) (0.56) (0.06)
– Due later than one year and notlater than five years 0.12 0.11 0.01
(0.30) (0.28) (0.02)
All the lease arrangements are upto four years.
Information pursuant to paragraphs 3 & 4 of part - II of Schedule VI of the Companies Act, 1956
(a) Expenditure in Foreign Currency Rs. Crores
(i) Royalty/Technical know-how/Technical Fee 1.54(6.53)
(ii) Travelling Expenses 1.25(0.97)
(iii) Interest –(0.18)
(iv) Investment in overseas subsidiary 7.65–
(v) Others 0.49(0.46)
Total 10.93(8.14)
(b) Earnings in Foreign Currency
(i) Export of goods including partly executed 140.37sales contracts on F.O.B. basis (117.57)
(ii) Commission –(0.07)
(iii) Others 0.12 (0.35)
Total 140.49(117.99)
(c) Dividend Remittances in Foreign Currency
No. of Non- No. of NetResident Shares Held Dividend
Shareholders (Rs. Crores)
Equity Shares of Rs. 10/- each. – – –(21) (271,593) (0.02)
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - IV (Contd.)
61
(d) Licensed and installed capacity, production, purchases, opening and closing balance and sales :
(i) MANUFACTURING OPERATIONS :
Installed Actual Opening Balance Closing Balance Sales Other Consumption QuantityCapacities** Production Quantity Value Quantity Value Quantity Value Captive Capitali- Misc.
Consu- sationmption
Rs. Crores Rs. Crores Rs. Crores
1. ***Agricultural Tractors 72,000 32,578 295 8.38 269 8.21 32,557 943.52 47 – –
(72,000) (33,786) (192) (5.59) (295) (8.38) (33,663) (931.29) (20) (0) –
2. ***Internal Combustion Engine 72,000 33,305 298 1.41 384 2.13 – – 32,057 – –
***Engine for Agricultural Tractors (72,000) (33,664) (127) (0.60) (298) (1.41) (–) (–) (33,350) (0) (143)
3. Round and Flat Tubes 180,000 108,235 4,463 0.21 4,244 0.21 93,948 7.49 – – –
Heating Elements (Meters) (180,000) (84,883) (2,659) (0.11) (4,463) (0.21) (85,522) (4.27) (–) (–) (–)
4. Double Acting Hydraulic Shock Absorbers 36,000 21,348 – – – – 21,348 8.58 – – –
for Railway Coaches (36,000) (27,455) (–) (–) (–) (–) (27,455) (9.58) (–) (–) (–)
5. Centre Buffer Couplers 1,200 335 – – – – 335 4.92 – – –
(1,200) (406) (–) (–) (–) (–) (406) (3.99) (–) (–) (–)
6. Automobile Shock Absorbers, Telescopic 4,000,000 2,159,678 205,076 3.98 208,453 4.85 2,156,301 102.30 – – –
Front Fork & McPherson struts (4,000,000) (2,794,736) (130,162) (2.90) (205,076) (3.98) (2,719,822) (118.21) (–) (–) (–)
7. Brake Block 600,000 1,297,715 – – 1,988 0.03 1,295,727 46.25 – – –
(600,000) (716,397) (–) (–) (–) (–) (711,614) (32.87) (–) (–) (4,783)
8. All types of Brakes used by Railways 36,000 8,768 – – – – 8,768 46.03 – – –
(36,000) (13,107) (–) (–) (–) (–) (13,107) (29.75) (–) (–) (–)
9. Others – – – – – – – 60.00 – – –
(–) (–) (–) (–) (–) (–) (–) (39.49) (–) (–) (–)
NOTES :(a) Installed capacity is on per annum basis; Sales quantities and values are for 15 months period.
** (b) As certified by the management and not verified by the auditors, being a technical matter.(c) Sales and production pertain to finished goods only. Opening and Closing stocks include partly executed contracts but exclude stocks held by the consuming/selling divisions.
(d) In item No. 3 Installed capacities and actual production are in meters, rest are in numbers.*** (e) Opening and Closing stocks of items of Research and Development have been excluded.
(f) Opening and Closing stocks are inclusive of Work-in-Progress.(g) Miscellaneous consumption includes samples for development, research, testing, export etc.(h) Captive consumption includes stocks transferred to divisions for sale as spare parts.(i) Item No. 2 is not included in trading/finished stock.
(ii) TRADING OPERATIONS :
Purchases Opening Balance Closing Balance Sales Other Consumption (Quantity)
Quantity Value Quantity Value Quantity Value Quantity Value Captive Capitali- Misc.Nos. Rs. Crores Nos. Rs. Crores Nos. Rs. Crores Nos. Rs. Crores Consu- sation
mption
Claas Combines – – 10 1.02 – – 10 1.02 – – –(–) (–) (41) (4.36) (10) (1.02) (31) (3.80) (–) (–) (–)
Claas Sugarcane Harvester – – – – – – – – – – –(–) (–) (13) (11.26) (–) (–) (–) (–) (–) (13) (–)
Implements Trailers, Compressor – 59.82 – 10.48 – 10.38 10.38 87.77 – – –accessories, spares and others (–) (64.21) (–) (8.71) (–) (10.48) (10.48) (76.76) (–) (–) (–)
NOTES :1. Opening and Closing balances include partly executed sales contracts but do not include goods-in-transit and Job-in-Progress.
(e) Value of Imports - CIF basis :
(Rs. Crores)
Raw Material Components Capital Trading Total& Spare parts Goods Goods
5.88 16.94 0.62 3.92 27.36(7.51) (15.27) (1.69) (27.48) (51.95)
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
Annexure - IV (Contd.)
ESCORTS LIMITED
62
(f) Imported and indigenous raw materials and components, stores and spares and tools consumed :
Value PercentageRs. Crores
Imported 60.89 7.02(32.16) (4.73)
Indigenous 806.72 92.98(648.33) (95.27)
Total 867.61 100.00(680.49) (100.00)
(g) Details of Raw Materials Consumed :
Unit of Quantity Value
Measure Rs. Crores Rs. Crores
1. Raw Materials (Basic)(i) Aluminium Kgs 108,352 1.22
Kgs (151,713) (1.53)
(ii) M.S. Sheets & Plates Kgs 350,098 1.31
Kgs (535,681) (1.77)
(iii) Bars Kgs 701,753 3.11
Kgs (766,054) (2.44)
(iv) Tubes Mtrs 1,189,282 7.48
Mtrs (1,861,295) (10.18)
(v) Strips Kgs 11,710 0.40
Kgs (16,292) (0.65)
(vi) Round Channel & Angles Kgs 21,024 0.12
Kgs (27,435) (0.13)
(vii) Other Steel Items Kgs 243 –
Kgs (183) –
(viii) Castings & Forgings Nos 1,430,152 117.20
Nos (1,844,316) (105.65)
(ix) Other Raw Materials Kgs 711 0.01 130.85
Kgs (1,691) (0.02) (122.37)
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
63
Unit of Quantity ValueMeasure Rs. Crores Rs. Crores
2. Components:
(i) Engines S - 312D (excluding Radiators & Silencers) Nos 2,832 11.63Nos (2,830) (9.26)
(ii) Engine E - 273 Nos 6,159 29.91Nos (952) (3.79)
(iii) Engine E - 2179D Nos 751 3.06Nos (1,703) (5.50)
(iv) Engine E - 3179 Nos 578 2.62Nos (1,872) (7.33)
(v) Engine E - 3215 Nos 1,499 7.06Nos (3,293) (12.97)
(vi) Engine E - 3312 Nos 610 3.44Nos (402) (1.73)
(vii) Engine Farmtrac - 35 Nos 7,237 37.03Nos (8,903) (35.06)
(viii) Engine Farmtrac - 45 Nos 4,972 26.79Nos (4,850) (20.08)
(ix) Engine Farmtrac - 50 Nos 327 1.58Nos (469) (1.81)
(x) Engine Farmtrac - 60 Nos 6,253 34.96Nos (7,538) (31.69)
(xi) Engine Farmtrac - 65 Nos 5 0.03Nos (3) (0.01)
(xii) Engine Farmtrac - 70 Nos 834 6.20Nos (535) (3.36)
(xiii) Other Components Nos 552.78 717.09Nos (411.08) (543.67)
32,057 847.94 (33,350) (666.04)
NOTE : Raw Materials and Components Consumed include sale of Raw Materials and Components.
General Notes : (a) Figures in brackets pertain to previous year.(b) Previous years figures have been regrouped wherever necessary.
RAJAN NANDA NIKHIL NANDA DR. M. G. K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S. A. DAVE DR. P. S. PRITAM S. C. BHARGAVADirector Director Director
G. B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
As per our report attachedFor S. N. DHAWAN & CO.
Chartered Accountants
C-37, Connaught Place S. N. DHAWANNew Delhi - 110 001 PartnerDated : January 20, 2006 M. No. 925
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
SCHEDULES 1-19 FORMING PART OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT
ESCORTS LIMITED
64
CASH FLOW STATEMENT
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before tax 31.02 (421.74)
Adjustments for :
Loss on sale/Provision for diminution in value of Long Term
investments & loans to Group Companies 172.51 185.02
Gain on sale of Long Term Investments (505.54)
Depreciation 52.86 55.71
Misc. Exp./Assets Write off/Provisions 71.24 18.24
Interest Expense 149.38 129.00
Dividend Income (0.19) (0.18)
Interest Income (7.59) (27.34)
Operating Profit before working capital changes (36.31) (61.29)
Adjustments for :
Trade and other Receivables 17.22 51.02
Money in Escrow Account (85.08)
Inventories (9.94) 1.92
Trade Payables 45.95 43.73
Miscellaneous Expenditure (12.89) (7.36)
(44.74) 89.31
Cash Generated from Operations (81.05) 28.02
Direct Taxes (Paid)/Refunds (18.95) (2.62)
Net Cash Flow from Operating Activities (100.00) 25.40
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (15.33) (37.24)
Proceeds from Sale of Fixed Assets 17.43 8.98
Movement in Loans and Advances (1.90) (109.20)
Purchase of Investments (29.85) (116.10)
Sale of Investments 529.14 247.64
Interest Received 2.06 19.45 `
Dividend Received 0.19 0.18
Net Cash Flow from Investing Activities 501.74 13.71
65
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
C. CASH FLOW USED IN FINANCING ACTIVITIES
Proceeds from Long Term Borrowings 85.60 239.18
Less : Repayment of Long Term Borrowings (252.00) (166.40) (98.10) 141.08
Proceeds/(Repayment) from Short Term Borrowings Net) (54.25) (52.27)
Interest Paid (155.95) (121.10)
Dividend Paid – (7.22)
Dividend Tax Paid – (0.93)
Net Cash used in Financing Activities (376.60) (40.44)
Net Increase/(Decrease) in Cash and Cash equivalents 25.14 (1.33)
Cash and Cash equivalents as at 01.07.2004 23.79 25.12
Cash and Cash equivalents as at 30.09.2005 48.93 23.79
NOTE :
1. Cash and Cash equivalents include Cash in hand, demand deposits with banks and short term highly liquid investments.
2. Previous years figures have been regrouped wherever necessary.
RAJAN NANDA NIKHIL NANDA DR. M. G. K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S. A. DAVE DR. P. S. PRITAM S. C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
As per our report attachedFor S. N. DHAWAN & CO.
Chartered Accountants
C-37, Connaught Place S. N. DHAWANNew Delhi - 110 001 PartnerDated : January 20, 2006 M. No. 925
ESCORTS LIMITED
66
V. Generic Names of Three Principal Products of the Company
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
I. Registration Details
Registration No. State Code
Balance Sheet Date
–
–
1 2 8 6 5 8 1 5
7 2 2 3 2 2
3 0 - 0 9 - 2 0 0 5
4 2 7 9 1 0 4
5 1 5 8 3 7 8
1 7 6 1 9 8 4
–
1 8 5 2 4 1 0 3
3 1 0 2 1 2
T R A C T O R S
8 7 0 8 8 0 . 0 0
S H O C K A B S O R B E R S
–
–
1 2 8 6 5 8 1 5
5 4 5 9 0 0 7
2 4 0 5 3 8 2
4 9 7 0 7 3 2
1 8 8 4 2 1
1 8 2 1 3 8 9 1
4 7 1 1 0 0
5 5C - 1 8 6 0
IV. Performance of Company (Amount in Rs. Thousands)
Accumulated Losses
Net Current Assets
Net Fixed Assets
Application of Funds
Secured Loans
Paid-up-Capital
Sources of Funds
Total Liabilities Total Assets
Reserves & Surplus
Unsecured Loans
Investments
Misc. Expenditure
Bonus Issue
Public Issue
Private Placement
Rights Issue
II. Capital Raised during the year (Amount in Rs. Thousands)
Deferred Tax Asset (Net)
7 8 6 3 0 0
+ –
Deferred Taxation + –
Total ExpenditureTurnover including Other Income
Profit/Loss Before Tax + –
3 9 0 4 0 0 3 9 0 9 1 2
Profit/Loss After Tax + –Provision for Tax + –
5
Earning per Share in Rs.
- -
Final Dividend Rate %
8 7 0 1 3 0 . 0 9
8 6 0 7 2 9 . 0 0
R A I L W A Y P A R T S
Item Code No.
Product Description
Item Code No.
Product Description
Item Code No.
Product Description
III. Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)
CONSOLIDATEDFINANCIAL
STATEMENT
68
69
AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF ESCORTS LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTSOF ESCORTS LIMITED
We have audited the attached Consolidated Balance Sheet of Escorts Limited Group as at September 30, 2005 and also the ConsolidatedProfit and Loss Account and the Consolidated Cash Flow Statement for the fifteen months period ended on that date annexed thereto.These financial statements are the responsibility of the management of Escorts Limited and have been prepared by the management on thebasis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion onthese financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes, examining on a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.
We did not audit the financial statements of certain subsidiaries and joint ventures, whose financial statements reflect total assets ofRs.188.54 crores as at September 30, 2005 and the total revenues of Rs.216.62 crores and cash flows amounting to Rs. 0.65 crores for thefifteen months period then ended. These financial statements and other financial information, have been audited by other auditors whosereports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of these subsidiaries and jointventures is based solely on the report of the other auditors.
Attention is invited to note 4.4 of Schedule 19. As explained in the note Escorts Agri Machinery Inc., USA,(EAMI) a wholly owned subsidiary,whose financial statements reflect total assets of Rs. 250.10 crores as at December 31, 2004 and the total revenues of Rs.283.61 croresand cash flows amounting to Rs. 1.84 crores for the 12 months period then ended have been considered in the preparation of consolidatedfinancial statements on the basis of audited financial statements and other financial information up to December 31, 2004 (audited by otherauditor). According to the requirements of Accounting Standard AS-21, Consolidated Financial Statements, financial statements used inthe consolidation should be drawn up to the same reporting date and in any case, the difference between reporting dates of parent companyand its subsidiary should not be more than six months. Therefore, considering the above financial statements in preparation of consolidatedfinancial statements is non compliance of Accounting Standard AS-21, “Consolidated Financial Statements”.
We further report that :
1. We did not carry out the audit of certain subsidiary and joint venture companies. These financial statements have been certified by themanagement and reflect total assets of Rs.397.69 crores as at September 30, 2005 and the total revenues of Rs. 487.17 crores andcash flows amounting to Rs. 0.64 crores for the fifteen months period then ended, and our opinion, insofar as it relates to the amountsincluded in respect of these subsidiaries and joint ventures is based solely on these certified financial statements. Since the financialstatements for the fifteen months period ended September 30, 2005, which were compiled by management of these companies werenot audited, any adjustments to their balances could have consequential effects on the attached consolidated financial statements.
2. The management has considered the financial statements of the EAMI for the period of 12 months (i.e. January 1, 2004 to December31, 2004) instead of 15 months period (i.e. June 30, 2004 to September 30, 2005) as stated above. Consequently, the effect of notconsidering the accounts up to the same period of parent company could not be determined, and therefore, we are unable to expressour opinion in the matter and the overall effect on the consolidated financial statements.
We report that the consolidated financial statements have been prepared by the management of Escorts Limited in accordance withthe requirements of Accounting Standard AS-21, Consolidated Financial Statements, AS-23, Accounting for Investments in Associatesand AS-27, Financial Reporting of Interest in Joint Ventures, issued by the Institute of Chartered Accountants of India.
Subject to the foregoing and based on our audit and on consideration of the reports of other auditors on separate financial statementand on the other financial information of the components, and subject to paragraph 2 above, in our opinion and to the best of ourinformation and according to the explanations given to us, the attached consolidated financial statements give a true and fair view inconformity with accounting principles generally accepted in India.
(a) in the case of Consolidated Balance Sheet, of the state of affairs of the Escorts Limited Group as at September 30, 2005;
(b) in the case of Consolidated Profit and Loss Account, of the profit for the fifteen months period ended on that date; and
(c) in the case of the Consolidated Cash Flow Statement, of the Cash Flows for the fifteen months period ended on that date.
For S.N. DHAWAN AND CO.Chartered Accountants
(VIJAY DHAWAN)Partner
M.No. 12565
Place : New Delhi
Dated : January 20, 2006
ESCORTS LIMITED
70
Schedules 1 to 19 annexed hereto form an integral part of the Consolidated Balance Sheet and Profit and Loss Account.
RAJAN NANDA NIKHIL NANDA DR. M.G.K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S.A. DAVE DR. P.S. PRITAM S.C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary As per our report attached
For S.N. DHAWAN & CO.Chartered Accountants
C-37, Connaught PlaceNew Delhi - 110 001 VIJAY DHAWANDated : January 20, 2006 Partner
M.No. 12565
30.09.2005 30.06.2004Schedule Rs. Crores Rs. Crores
SOURCES OF FUNDSShare Capital 1 62.04 62.03Reserves & Surplus 2 373.93 451.09
Total Shareholders’ Funds 435.97 513.12Minority Interest 13.30 48.00Loans
Secured 3 627.33 719.43Unsecured 4 259.48 886.81 299.21 1,018.64
Net Deferred Tax Liabilities 78.10 87.24
Total 1,414.18 1,667.00
APPLICATION OF FUNDSFixed Assets
Gross Block 1,258.38 1,576.52Less : Depreciation 600.45 657.14Less : Provision for impairment 67.85 73.89
Net Block 5 590.08 845.49Capital Work-in-Progress 2.67 22.12
Total Fixed Assets 592.75 867.61Investments : Long Term
Associates – 28.53Others 247.85 247.85 306.33 334.86
Net Deferred Tax Assets 170.04 131.32Preoperative Expenditure Pending Allocation 5.25 5.09Current Assets, Loans & AdvancesCurrent Assets 6
Inventories 254.35 165.66Accrued Billing 0.64 –Sundry Debtors 363.04 371.51Cash & Bank Balances 177.65 53.09Other Current Assets 0.59 0.29
796.27 590.55Loans & Advances 7 203.98 234.83
Total Current Assets, Loans & Advances 1,000.25 825.38
DEDUCTCurrent Liabilities & Provisions 8
Current Liabilities 572.40 481.51Provisions 51.54 32.63
Total Current Liabilities & Provisions 623.94 514.14
Net Current Assets 376.31 311.24Miscellaneous Expenditure(to the extent not written off or adjusted) 21.98 16.88
Total 1,414.18 1,667.00
Significant Accounting Policies 16Related Party Disclosures 17Segment Information 18Notes to Accounts 19
CONSOLIDATED BALANCE SHEET OF ESCORTS LIMITED AS AT SEPTEMBER 30, 2005
71
Period ended Period ended30.09.2005 30.06.2004
Schedule Rs. Crores Rs. Crores
INCOMEGross Sales 1,860.70 1,477.50Less : Excise Duty 85.51 174.54Net Sales 1,775.19 1,302.96Business Income 9 458.95 629.58Income from Investments 10 503.01 72.75Total 2,737.15 2,005.29
EXPENDITUREMaterial, Manufacturing & Operating 11 1,486.64 1,169.47Personnel 12 315.03 341.68Sales & Administration 13 445.86 342.31Interest 14 162.37 192.00
2,409.90 2,045.46Profit before Depreciation and Amortisation 327.25 (40.17)Depreciation 102.49 205.18Amortisation of Expenditure 15 10.08 112.57 16.84 222.02
Profit & Loss before Tax, Share in loss ofAssociates & Minority Interest 214.68 (262.19)
Provision for impairment of assets – 69.43Pre-operative expenditure pending allocation written-off – 87.31Provision for dim.in value of Long Term Investment & Loans to Group co. 105.91 105.91 – 156.74
108.77 (418.93)Share in loss of associates 1.98 11.89
PROFIT/(LOSS) BEFORE TAX 106.79 (430.82)Provision for Taxation Current 42.22 11.60
Deferred (56.04) (13.82) (115.92) (104.32)PROFIT/(LOSS) AFTER TAX 120.61 (326.50)
Minority Interest (0.23) (1.12)PROFIT/(LOSS) AFTER TAX ATTRIBUTABLE TO THE COMPANY 120.84 (325.38)
(Short)/Excess Provision of Income Tax for previous years (0.08) –Transfer from Debenture Redemption Reserve 12.70 5.89Total 133.46 (319.49)
APPROPRIATIONSCapital / Debenture Redemption Reserve 2.16 –General Reserve 0.61 1.12Dividend/ Dividend Tax 0.07 0.03Balance carried to Balance Sheet 130.62 (320.64)Total 133.46 (319.49)
EARNINGS PER SHARE (Face Value Rs. 10)– Basic and Diluted (in Rupees) 19.48 (52.45)Significant Accounting Policies 16Related Party Disclosures 17Segment Information 18Notes to Accounts 19
CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE 15 MONTHS PERIOD ENDED SEPTEMBER 30, 2005
Schedules 1 to 19 annexed hereto form an integral part of the Consolidated Balance Sheet and Profit and Loss Account.
RAJAN NANDA NIKHIL NANDA DR. M.G.K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S.A. DAVE DR. P.S. PRITAM S.C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary As per our report attached
For S.N. DHAWAN & CO.Chartered Accountants
C-37, Connaught PlaceNew Delhi - 110 001 VIJAY DHAWANDated : January 20, 2006 Partner
M.No. 12565
ESCORTS LIMITED
72
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 1 : SHARE CAPITAL
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
AUTHORISED CAPITAL
7,70,00,000 Equity Shares of Rs. 10 each 77.00 77.00
33,30,00,000 Unclassified Shares of Rs. 10 each – 333.00
7,73,00,000 Unclassified Shares of Rs. 100 each 773.00 –
850.00 410.00
ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
7,22,32,240 Equity Shares of Rs. 10 each 72.23 72.23
Less : Share capital held by subsidiaries (prior to their 10.19 10.20
being subsidiaries) and by joint ventures (based on
proportionate consolidation)
62.04 62.03
SCHEDULE 2 : RESERVES AND SURPLUSRs. Crores
Share Capital Capital Share Amalga- Debenture General Profit Revalu- Total PreviousPremium Reserve Redemption Forfeiture mation Redemption Reserve & Loss ation periodReserve Reserve Reserve Reserve Reserve Account Reserve figures
As at June 30, 2004 101.39 103.04 0.80 3.22 48.46 21.79 466.00 (404.99) 111.38 451.09 349.17Additions:Transfer from Profit and Loss Account 2.16 0.61 130.62 133.39 (319.52)Adjustment for consolidation @ (16.73) (103.04) (3.85) (59.99) (183.61) 436.42
84.66 – 0.80 3.22 48.46 23.95 462.76 (334.36) 111.38 400.87 466.07
Deductions:On assets sold 5.51 5.51 0.11Transfer to Profit & Loss Account 12.70 8.73 21.43 14.87
As at September 30, 2005 84.66 – 0.80 3.22 48.46 11.25 462.76 (334.36) 97.14 373.93 * 451.09
2004-05 2003-04
* Includes joint venture share (11.78) (14.27)
@ Amount includes an adjustment of opening consolidated reserves of Rs. 164.17 crores of Escorts Heart Institute & Research Centre Limited and its subsidiaries and an opening consolidated lossof Rs. 19.44 crores of Escorts Agri Machinery Inc., USA and its subsidiaries.
73
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 3 : SECURED LOANS
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
From Banks:Cash Credit/Working Capital Term Loans 273.25 294.24Interest Accrued & Due 1.05 2.04
Loans from:Banks 148.20 134.51Interest Accrued & Due 1.45 0.86
Others 154.92 171.00Interest Accrued & Due – 1.84
Under Asset Credit Scheme 0.09 9.00
Vehicle Loans 0.06 1.79
Foreign Currency Loan 3.31 6.81
Debentures12% Secured Redeemable Non-Convertible Debentures – 50.7812% Secured Redeemable Non-Convertible Debentures 20.00 20.0012% Secured Redeemable Non-Convertible Debentures 25.00 25.00Interest Accrued & Due – 1.56
Total 627.33 719.43
Includes joint venture share 36.71 28.95
NOTE :Loans under different categories are secured against certain assets, property, equipment and other immovable properties, inventoriesand receivables of the parent company or concerned subsidiaries and joint ventures.
SCHEDULE 4 : UNSECURED LOANS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Fixed Deposits 99.27 150.16
Long term loans from Banks 6.00 10.00Interest Accrued & Due – 0.10
Long term loans from others 27.23 8.42Interest Accrued & Due 0.53 –
Inter Corporate Deposits 77.64 61.65Interest Accrued & Due 0.42 0.30
Banks Book Overdraft 24.91 5.23Short Term Loans & Advances :
From Bank - Others 1.13 31.05
From Others 22.20 29.76Interest Accrued & Due 0.15 2.54
Total 259.48 299.21
Includes joint venture share 16.93 21.28
ESCORTS LIMITED
74
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 5 : FIXED ASSETSRs. Crores
Description Original Additions Deductions/ Original Provision for Depreciation Depreciation Deductions Depreciation Net Book Net BookCost as at adjustments Cost as at Impairment upto & w/off for during upto Value as on Value as on30.06.2004 30.09.2005 30.06.2004 the period the period 30.09.2005 30.09.2005 30.06.2004
Land 118.26 3.62 25.54 96.34 – 0.09 0.04 – 0.13 96.21 118.17Buildings 313.31 13.02 86.31 240.02 – 124.37 20.25 22.79 121.83 118.19 188.94Leasehold Improvements 3.96 1.60 – 5.56 – 3.20 1.07 – 4.27 1.29 0.76Plant & Machinery 843.07 53.46 228.37 668.16 – 403.36 70.99 127.23 347.12 321.04 439.71Furniture & Fixtures 106.00 3.70 9.72 99.98 – 74.43 8.10 6.76 75.77 24.21 31.57Vehicles 18.46 0.88 10.09 9.25 – 10.48 1.54 5.97 6.05 3.20 7.98
Sub-Total (A) 1,403.06 76.28 360.03 1,119.31 – 615.93 101.99 162.75 555.17 564.14 787.13
Assets held for saleLand 1.43 – – 1.43 – – – – – 1.43 1.43Buildings 1.80 – – 1.80 – 0.59 – – 0.59 1.21 0.17Plant & Machinery 5.78 – – 5.78 – 0.78 – – 0.78 5.00 –
Sub-Total (B) 9.01 – – 9.01 – 1.37 – – 1.37 7.64 1.60
Intangible AssetsGoodwill 42.10 3.63 39.45 6.28 – 5.73 0.89 4.39 2.23 4.05 36.37Licence Fees 78.60 – – 78.60 67.85 10.75 – – 10.75 – –Prototype 1.21 – – 1.21 – 0.97 0.19 – 1.16 0.05 0.24Technical knowhow 27.77 2.34 1.14 28.97 – 14.06 5.08 0.20 18.94 10.03 13.71Software 14.77 0.23 – 15.00 – 8.33 2.50 – 10.83 4.17 6.44
Sub-Total (C) 164.45 6.20 40.59 130.06 67.85 39.84 8.66 4.59 43.91 18.30 56.76Capital Work-in-Progress (D) 22.66 2.46 21.91 3.21 0.54 – – – – 2.67 22.12
Total (A+B+C+D) 1,599.18 84.94 422.53 1,261.59 68.39 657.14 110.65 167.34 600.45 592.75 867.61
Previous Year Figures 2,213.50 123.13 737.45 1,599.18 74.43 742.11 215.07 300.04 657.14 867.61
* includes joint venture share: 30.09.2005 30.06.2004Gross Block 70.00 66.50Depreciation 37.05 27.69Net Block 32.95 38.81Capital Work-in-Progress 0.23 –Total Fixed Assets 33.18 38.81
SCHEDULE 6 : CURRENT ASSETS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Interest/Dividend accrued on Investments and Deposits 0.59 0.29
Stocks (as taken, valued and certified by the Management)Raw Material and Components 126.95 93.65Finished & Trading Goods 75.85 34.67Work-in-Progress 35.86 9.41Stores and Machinery Spares 7.54 9.84Medical Consumables,Drugs and Pharmacueticals – 5.09Loose Tools 10.41 10.04Current Investments 7.18 7.72
263.79 170.42Less : Provision for Obsolete Stock 9.44 4.76
254.35 165.66
Accrued Billing Revenue 0.64 –
Sundry DebtorsDebts outstanding for over six monthsSecured 1.70 1.23Unsecured – Considered Good 123.19 107.93
– Considered Doubtful 79.14 27.48
204.03 136.64Less : Provision for doubtful debts 79.14 27.48
124.89 109.16
Other DebtsSecured 1.85 14.80Unsecured - Considered Good 236.30 247.55
238.15 262.35
Total Debtors 363.04 371.51
75
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 6 : CURRENT ASSETS (Contd.)
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
Cash & Bank BalancesCash in hand 4.19 2.15Cheques in hand and in transit 5.32 0.67On Current/Cash Credit Accounts with Banks 54.77 22.10Held in Escrow Account (Refer Note 3.1 in Schedule 19) 85.08 –On Short/Fixed Deposit with Banks 28.28 24.21
(Pledged with various Banks/Govt. Authorities/Financial Institutions)(Also refer Note 1.2 in Schedule 19)
In Post Office Savings Bank Accounts 0.01 3.96(Pledged as security with Government Authorities)
177.65 53.09
Total 796.27 590.55
Includes joint venture shareStocks / Inventory 14.81 12.86Sundry Debtors 34.83 28.68Cash and Bank balances 4.52 2.59Other Current Assets 0.46 0.15
Total 54.62 44.28
SCHEDULE 7 : LOANS & ADVANCES
30.09.2005 30.06.2004Rs. Crores Rs. Crores
Loans :Unsecured – Considered Good 6.48 34.62
– Considered Doubtful 0.48 0.52
6.96 35.14Less : Provision for doubtful Loans 0.48 6.48 0.52 34.62
Inter-Corporate Deposits :Unsecured – Considered Good 62.98 64.65
– Considered Doubtful 1.46 2.87
64.44 67.52Less : Provision for Doubtful Inter-Corporate Deposits 1.46 62.98 2.87 64.65
Advances recoverable in cash or in kindor for value to be received :
Unsecured – Considered Good 122.23 121.83– Considered Doubtful 50.96 7.44
173.19 129.27Less : Provision for Doubtful Advances 50.96 122.23 7.44 121.83
Deposits :Deposits – Considered Good 12.29 13.73
– Considered Doubtful 0.25 0.24
12.54 13.97Less : Provision for Doubtful Deposits 0.25 12.29 0.24 13.73
Total 203.98 234.83
Includes joint venture share 23.38 16.17
ESCORTS LIMITED
76
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 8 : CURRENT LIABILITIES & PROVISIONS
30.09.2005 30.06.2004Rs. Crores Rs. Crores
CURRENT LIABILITIESAcceptances 76.74 68.88Sundry Creditors 348.56 303.05Due to Directors – 0.12Advance Payments 40.85 11.08Liability towards Investors Education and Protection Fund underSection 205C of the Companies Act, 1956 will be determinedon the respective due datesi) Unpaid Dividends 1.21 1.76ii) Unpaid matured Deposits 15.54 4.67iii) Unpaid matured Debentures 0.75 1.04iv) Unpaid matured Secured Premium Notes 0.10 0.13v) Interest accrued on (i) to (iv) above 0.11 17.71 0.47 8.07
Other Liabilities 78.20 79.33Interest accrued but not due on loans 10.34 10.98
572.40 481.51PROVISIONS
Leave Encashment 8.62 9.37Taxation 321.21 299.74Less : Advance Tax 278.29 42.92 276.48 23.26
51.54 32.63
Total 623.94 514.14
Includes joint venture shareCurrent Liabilities 54.08 37.63Provisions 5.05 0.26
Total 59.13 37.89
SCHEDULE 9 : BUSINESS INCOME
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Income from Rendering of ServicesInvestment, management and advisory 1.98 1.81Trading income 37.44 5.37Health care 350.83 321.66Software development/ISP/Other services 13.15 14.41Subscriber Revenue from ISP and Telecom – 403.40 236.31 579.56
Business Income : OthersCommission 1.05 4.24Erection & Servicing 2.85 2.04Lease Rental 0.06 0.45Cash subsidy/Duty Drawback 12.99 4.52Scrap Sale 2.34 2.30Unclaimed balance written back 0.90 0.65Provision no longer required written back 5.07 13.86Royalty Income – 0.33Surplus on Sale of Assets (net) 6.46 –Exchange Variation (net) – 2.65Others 23.83 55.55 18.98 50.02
Total 458.95 629.58
Includes joint venture share 33.23 30.17
77
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 10 : INCOME FROM INVESTMENTSPeriod ended Period ended
30.09.2005 30.06.2004Rs. Crores Rs. Crores
DividendsTrade Investments 0.38 0.05Other Investments 0.04 0.42 0.05 0.10
Net Surplus on Sale of Investments 502.59 72.65(Refer Note 3.1 in Schedule 19)
Total 503.01 72.75
Includes joint venture share 2.10 (0.73)
SCHEDULE 11 : MATERIAL, MANUFACTURING AND OPERATING EXPENSES
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
A. Raw Material & Components ConsumedOpening Stock 91.42 76.80Add : Purchases 1,227.88 800.85
1,319.30 877.65Less : Closing Stock 124.67 1,194.63 89.55 788.10
B. Finished & Trading Goods and Work-in-Progress ConsumedOpening StockFinished & Trading Goods 31.84 42.65Work-in-Progress 9.41 9.18
41.25 51.83Add : Purchases 80.72 92.95Less : Capitalised – 11.77
121.97 133.01Less : Closing StockFinished & Trading Goods 34.78 36.19Work-in-Progress 6.71 80.48 9.41 87.41
Material Consumed 1,275.11 875.51Excise duty on increase/(decrease) in Stock of Finished Goods (0.16) 0.23Stores, Spares and Tools 23.29 17.55Lease Charges on Plant & Machinery 2.32 1.56Licence Fees and Network Operation Charges 1.48 82.32Healthcare Operating Expense 121.28 118.34Software development/ISP/Other Operating Expenses 0.71 1.34Power and Fuel 42.01 43.63Repairs to Building 4.65 6.20Repairs to Machinery 15.83 22.71Water 0.12 0.08
Total 1,486.64 1,169.47
Includes joint venture share 79.73 59.46
SCHEDULE 12: PERSONNEL
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Salary, Wages and Bonus 246.56 244.84Contribution to Gratuity Fund 9.45 7.56Contribution to Provident Fund and other Funds 21.03 50.25Staff Welfare Expenses 37.99 39.03
Total 315.03 341.68
Includes joint venture share 6.57 5.55
ESCORTS LIMITED
78
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 13 : SALES AND ADMINISTRATION EXPENSES
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Erection and Servicing 1.63 1.96Warranties 6.59 9.53Rent (net) 6.64 12.40Rates and Taxes 1.78 4.85Insurance 16.24 16.57Bank and Finance Charges 19.37 34.78Travelling & Conveyance 28.34 29.09Printing & Stationery 5.09 5.90Communication Charges 9.74 10.92Repairs and Maintenance 13.90 14.18Audit Fee & Legal Expenses 44.85 32.14Entertainment 0.62 0.89Commission, Discount and Brokerage 43.12 52.67Advertisement 17.55 27.98Royalty 8.46 6.16Packing, Freight & Forwarding 47.10 32.84Sales & Purchase Tax 3.30 1.08Directors Fee & Commission 0.04 0.10General 87.26 22.52Loss on Sale of Assets (net) 0.55 3.57Loss on Sale of Investments 0.10 –Exchange Variation (net) 1.59 –Amount written off 8.92 11.20Provision for Doubtful Debts/Advances/Deposits 73.08 10.98
Total 445.86 342.31
Includes joint venture share 34.45 18.41
SCHEDULE 14: INTEREST
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Interest Expense on:Fixed period Loans and Debentures 117.03 139.84Others 59.50 79.33
176.53 219.17Less : Interest Income*:
Others** 14.16 27.17
Total 162.37 192.00
Includes joint venture share 4.43 4.48
* Income tax deducted at source 1.56 1.09** Includes interest on investments in deposits and bonds, income tax refunds, housing loan to employees, dealer overdues etc.
SCHEDULE 15: AMORTISATION OF EXPENDITURE
Period ended Period ended30.09.2005 30.06.2004Rs. Crores Rs. Crores
Voluntary Retirement Scheme 5.10 8.63Miscellaneous Expenditure written-off 4.98 8.21
Total 10.08 16.84
Includes joint venture share 0.17 0.06
79
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 16 : SIGNIFICANT ACCOUNTING POLICIES
1. ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention in accordance with applicable accounting standards andrelevant provisions of the Companies Act, 1956.
2. PRINCIPLES OF CONSOLIDATION
� The consolidation of accounts is prepared in accordance with the requirement of Accounting Standard 21 (AS-21) “ConsolidatedFinancial Statement”, Accounting Standard 23 (AS-23) “Accounting for Investments in Associates in the Consolidated FinancialStatements” and Accounting Standard (AS-27) “Financial Reporting of Interests in Joint Ventures” issued by the Institute ofChartered Accountants of India. The consolidated financial statements include the financial statements of Escorts Limited (‘theParent Company’), its Subsidiary Companies and Joint Ventures.
� The Subsidiaries, Joint Ventures and Associates considered in the preparation of consolidated financial statements are as perAnnexure attached.
The Subsidiaries, Joint Ventures and Associates considered in the preparation of consolidated financial statements are as follows :
Name of the Company Country of Proportion of Held by Reporting period/Incorporation ownership dates
LIST OF SUBSIDIARIES1. Escorts Automotives Ltd. (EAL) India 100% Escorts Limited April ’04-March ’052. Escorts Construction Equipment Ltd. (ECEL) India 100% Escorts Limited April ’04-March ’053. Escorts Agrimachinery Inc. (EAMI)* USA 100% Escorts Limited January ’05-Dec. ’054. Farmtrac Tractors Europe Sp. z.o.o Poland 100% EAMI January ’05-Dec. ’05
(formerly Pol Mot Spolka z.o.o)5. Beaver Creeks Holdings LLC (BCH) USA 51% EAMI January ’05-Dec. ’056. Farmtrac North America LLC, USA USA 49% EAMI January ’05-Dec. ’05
(formerly Long Agri Business LLC, USA) 51% BCH7. Escosoft Technologies Ltd. (ESCOSOFT) India 80.05% Escorts Limited April ’04-March ’058. Escosoft Technologies (USA) Ltd. USA 100% ESOFT-UK January ’05-Dec. 059. Escosoft Technologies (UK) Pvt. Ltd. UK 100% ESOFT-Mauritius April ’04-March ’0510. Escosoft Singapore Pte. Ltd.* Singapore 100% ESOFT-UK April ’04-March ’0511. E- Soft (Mauritius) Holdings Ltd. Mauritius 100% ESCOSOFT April ’04-March ’0512. IFS Solutions Limited India 99.99% ESCOSOFT April ’04-March ’0513. CA Escosoft Ltd. India 99.9999% ESCOSOFT April ’04-March ’0514. Escotoonz Entertainment Pvt. Ltd. India 97.56% ESCOSOFT April ’04-March ’0515. Esconet Services Ltd. (ESCONET) India 100% Escorts Limited April ’04-March ’0516. Cellnext Solutions Ltd. India 96.17% ESCONET April ’04-March ’0517. iServ India Solutions Pvt. Ltd. (iSERVE) India 100% ESCONET April ’04-March ’0518. Automatrix India Pvt. Ltd. India 99.97% ESCONET April ’04-March ’0519. Escorts Securities Ltd. (ESL) India 49.00% EAML April ’04-March ’05
(Board Controlled)20. Escorts Asset Management Ltd. (EAML) India 30.00% Escorts Limited April’04-March’05
(Board Controlled)21. Escorts Telecom Services Ltd. India 100% Escorts Limited April’04-March’05
(Formerly Escotel Telecommunications Ltd.)22. Escorts Health Care Services Ltd. India 100% Escorts Limited April’04-March’05
(Formerly Escorts Research and Development Ltd.)23. Escorts Heart Institute and Research India 79.99% Escorts Limited April’04-March’05
Centre Limited (EHIRCL), Delhi #23. Escorts Heart and Super Speciality Institute Ltd., Amritsar # India 80.42% EHIRC April’04-March’0524. Escorts Heart Centre Ltd., Kanpur # India 77.16% EHIRC April’04-March’0525. Escorts Heart and Super Speciality Hospital Ltd., Jaipur # India 98.80% EHIRC April’04-March’05
26. Escorts Hospital and Research Centre Ltd., Faridabad # India 100% EHIRC April’04-March’05
LIST OF JOINT VENTURES1. Carraro India Ltd. India 49.00% Escorts Limited April ’04-March ’052. Escorts Motors Ltd. India 2.00% Escorts Limited April ’04-March ’053. Escotrac Finance & Investments Pvt. Ltd. India 49.81% Escorts Limited April ’04-March ’05
(ESCOTRAC)* 49.81% EFILL
ESCORTS LIMITED
80
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
3. RECOGNITION OF REVENUE
� Revenue from sale of goods are recognised on despatch, except in the following cases:
– Billing revenue and revenue from telecom services on account of sale of goods is recognised on completion of provisionof service and despatch of goods respectively.
– Revenue from healthcare services are recognised on discharge of the patients i.e. based on bills raised and also includesrevenue representing value of services rendered pending billing in respect of in-patients undergoing treatment as at theend of the financial period.
– Fixed price contract is recognised on the basis of milestone achieved or percentage of completion as per the contract andother revenue from rendering of services is recognised as per the specific terms of the contract on the basis of man-days/man-hour rates for services rendered.
– Sub-Licensing of Software Applications is recognized on the basis of granting rights to use such sub-licenses and AnnualMaintenance Contracts for Software Services is recognised on time proportion basis.
– Revenue from investment management and advisory services is recognized on accrual basis.
� Dividend is taken on accrual basis, if declared/received by the time of finalisation of the accounts.
4. FIXED ASSETS, DEPRECIATION AND AMORTISATION
i) Tangible
Fixed Assets:
� Fixed assets are stated at cost or at replacement cost in case of revaluation, less accumulated depreciation.
Depreciation & Amortisation:
– Depreciation on Plant and Machinery is provided on Straight Line Method. Depreciation on all other Fixed Assets is calculatedon the basis of Diminishing Balance Method at the rates prescribed in Schedule XIV of the Companies Act, 1956 except in caseof Escorts Heart Institute and Research Centre Limited (EHIRC) where Diminishing Balance Method is adopted on Plant andMachinery.
– Leasehold Land is amortised over a period of lease except at EHIRC where no write off is being made as the land is on long-termlease.
– Leasehold Improvements are written over a period of six years.
– Depreciation in Companies related to e-commerce and software development is provided on straight-line method based onestimated useful life of the assets.
4. Escorts Finance Investment & Leasing Pvt. Ltd. (EFILL)* India 49.81% Escorts Limited April ’04-March ’0549.81% ESCOTRAC
5. Hughes Escorts Communications Limited* India 25.10% Escorts Limited April ’04-March ’05
6. Escorts Telecommunications Ltd.* India 93.44% Escorts Limited April ’04-March ’056.56% iServe
LIST OF ASSOCIATES1. Escorts Consumer Credit Ltd. India 5.88% ECEL April ’04-March ’05
17.65% ESL23.53% EAML
NOTES :1. * The audited accounts for their respective accounting periods have been adjusted on provisional basis to 15 months period ending
30th September, 2005, except EAMI where accounts have been prepared and considered upto 31st December, 2004.
2. # Escorts Heart Institute and Research Centre Ltd. ceased to be subsidiary on 28th September,2005, provisional profit and lossaccounts till the date of separation have been consolidated.
3. Escorts Motors Limited (a joint venture company) has been ignored, as 2% holding has been considered as insignificant.
Name of the Company Country of Proportion of Held by Reporting period/Incorporation ownership dates
SCHEDULE 16 : SIGNIFICANT ACCOUNTING POLICIES (Contd.)
81
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
ii) Intangible
� In accordance with AS 26 - Intangible Assets are valued at cost less accumulated amortisation and any impairment losses.
– Prototypes including work-in-progress developed during Research & Development and advances given for Toolingare written-off over a period of four years.
– Technical Know-how fees and expenditure on major software products is written-off over a period of six years.
– The fixed component of licence fees in case of Escotel Mobile Communications Limited and EscortsTelecommunications Limited has been capitalised as an asset and amortised over the period of license.
– Goodwill is amortised over a period of ten years.
5. IMPAIRMENT OF ASSETS
Impairment is ascertained at each Balance Sheet date in respect of Cash Generating Units for which any indication of any possibleimpairment exists. An impairment loss is recognised if the carrying amount of assets of a Cash Generating Unit exceeds its recoverableamount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated futurecash flows are discounted to their present value based on an appropriate discount rate.
6. INVENTORY VALUATION
Raw Material and Components, stores and machinery spares are stated at lower of cost and net realisable value.
Loose Tools are stated at cost or under.
Work-in-Progress, Finished and Trading goods spares are stated at lower of cost and net realisable value.
In determining the cost of Raw Materials and Components, tools, jigs and dies, stores and machinery spares Weighted Average CostMethod is used while in the case of Trading goods FIFO Method is used.
Work-in-Progress and Finished Goods include cost of conversion and other costs incurred in bringing the Inventories to their presentlocation and condition.
7. RETIREMENT BENEFITS
The liability on account of Superannuation & Gratuity is provided on the basis of actuarial valuation.
8. LEAVE ENCASHMENT
The provision in accounts for leave encashment benefit to employees is based on actuarial valuation.
9. FOREIGN EXCHANGE FLUCTUATION
Transactions in foreign currency are recorded at the exchange rates prevailing at the dates of the transactions. Gains/losses arisingout of fluctuation in exchange rates on settlement are recognised in the Profit & Loss Account, except in case of fixed assets wheresuch gains/losses are adjusted to the carrying cost of the respective assets.
Foreign currency monetary assets & liabilities are restated at the exchange rate prevailing at the year end and the overall net gain/loss is adjusted to the Profit & Loss Account, except in case of liabilities relating to acquisition of fixed assets which are adjusted to thecarrying cost of the respective assets.
In case of Forward Exchange Contracts, the difference between the forward rate and the exchange rate at the date of transaction isrecognised in the Profit & Loss Account over the life of the contract, except in case of liabilities relating to acquisition of fixed assets,which are adjusted to the carrying cost of the respective assets.
10. INVESTMENTS
Current Investments are stated at lower of cost and fair value; and Long Term Investments, other than in Associates, at cost. Whereapplicable, provision is made if there is a permanent fall in valuation of Long Term Investments.
Investments in Associates are accounted for on the basis of equity method.
11. BORROWING COST
Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of cost of such assetsupto the date the assets are ready for its intended use. All other borrowing costs are recognised as an expense in the year in whichthey are incurred.
12. DEFERRED REVENUE EXPENDITURE
Development expenditure represents Project related development expenditure/business process re-engineering consultancy. Suchexpenditure is written off over a period of six years.
Payment under Voluntary Retirement Scheme to the direct/indirect employees is written off over a period of five years.
Upfront and Structuring fees are written off during the period of the term of the respective loan.
Preliminary Expenses and Deferred Revenue Expenditure incurred by Escorts Heart Super Speciality Institute Ltd. (EHSSIL) andEscorts Heart Super Speciality Hospital Ltd. (EHSSHL) during incorporation/construction period are written off over a period of 5 yearsfrom the date of commencement of commercial operations.
SCHEDULE 16 : SIGNIFICANT ACCOUNTING POLICIES (Contd.)
ESCORTS LIMITED
82
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 16 : SIGNIFICANT ACCOUNTING POLICIES (Contd.)
SCHEDULE 17 : RELATED PARTY DISCLOSURES
Related party disclosures (as identified and certified by the management)
Related party disclosures as required under Accounting Standard (AS-18) on “Related Party Disclosures” issued by the Institute of Chartered
Accountants of India are given below :
(i) Joint Ventures and Associates
Domestic
Escorts Finance Investment & Leasing Private Limited
Escotrac Finance & Investment Private Limited
Carraro India Limited
Escorts Motors Limited
Hughes Escorts Communications Limited
Escorts Telecommunications Limited
Escorts Consumer Credit Limited
(ii) Key Management Personnel (Whole-Time Directors)
Mr. Rajan Nanda
Mr. Nikhil Nanda
(Upto 16th August, 2005)
13. DEFERRED TAX
Deferred Tax is recognised, subject to consideration of prudence, on timing differences, representing the difference between thetaxable income/(loss) and accounting income/(loss) that originated in one period and are capable of reversal in one or more subsequentperiods. Deferred Tax assets and liabilities are measured using tax rates and the tax laws that have been enacted or substantivelyenacted by the Balance Sheet date. Deferred Tax assets viz. unabsorbed depreciation and carry forward losses are recognised ifthere is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.
14. TRANSLATION OF FOREIGN SUBSIDIARIES
In case of foreign subsidiaries, the revenue and expense transactions at the year end reflected in Profit & Loss Account have beentranslated into Indian Rupees at an average exchange rate.
The assets and liabilities in the Balance Sheet have been translated into Indian Rupees at the closing exchange rate at the year end.
The resultant translation exchange, gain / loss is adjusted in Profit and Loss Account.
15. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions are recognised for liabilities that can be measured only by using a substantial degree of estimation, if
a) the Company has a present obligation as a result of past event,
b) a probable outflow of resources is expected to settle the obligation and
c) the amount of obligation can be reliably estimated.
Reimbursements expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that thereimbursement will be received.
Contingent liability is disclosed in the case of
a) a present obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle theobligation
b) a possible obligation, unless the probability of outflow of resources is remote.
Contingent Assets are neither recognised nor disclosed.
Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.
83
(iii) Related Party Transactions –
TRANSACTIONS WITH JOINT VENTURES Annexure - I
(Rs. Crores)
Nature of Transactions Escorts Escotrac Carraro Escorts Hughes Escorts Escotel TotalFinance Finance & India Ltd. Motors Escorts Telecomm- Mobile
Investment & Investment Ltd. Communi- unications Communi-Leasing Ltd. Pvt. Ltd. cations Ltd. cations
Ltd. Ltd.#
Sale of goods – – 0.60 – – – – 0.60– – (0.21) – – – – (0.21)
Rendering of services (Income) – 0.01 – – – – – 0.01– (0.02) – – (0.10) – (0.25) (0.36)
Dividend Income – – – – 0.19 – – 0.19– – – – (0.18) – – (0.18)
Purchases of goods – – 20.56 – – – – 20.56– – (14.98) – – – – (14.98)
Receiving of services – – – – – – – –– – – – – – – –
Management contracts including for – – – – – – – –deputation of employees – – – – – – (0.92) (0.92)Investments
Balance as at 01.07.2004 83.82 98.48 19.60 1.50 3.76 57.00 – 264.16Purchased during the period – – – – – – – –
(25.00) (25.00) – – – – (81.60) (131.60)Sold during the period – – – – – – – –
– – – – – – (268.26) (268.26)Balance as at 30.09.2005 83.82 98.48 19.60 1.50 3.76 57.00 – 264.16
(83.82) (98.48) (19.60) (1.50) (3.76) (57.00) – (264.16)Loans/ICD Given
Balance as at 01.07.2004 – – – – – 12.93 – 12.93Given/Additions during the period – – – – – – – –
– – – – – (80.00) – (80.00)Returned during the period – – – – – – – –
(25.00) (25.00) – – – (137.47) (87.63) (275.10)Balance as at 30.09.2005 – – – – – 12.93 – 12.93
– – – – – (12.93) – (12.93)Advances Given (incl. Running accounts)
Balance as at 01.07.2004 0.00 (0.01) – 0.02 0.09 126.60 – 126.71Additions during the period – – – – – 3.19 – 3.19
– (0.02) – – (0.15) (222.36) (1.36) (223.88)Reductions during the period 0.00 0.00 – – 0.02 0.10 – 0.13
(0.00) (0.01) (0.34) – (0.12) (101.97) (1.59) (104.03)Balance as at 30.09.2005 – (0.01) – 0.02 0.07 129.69 – 129.77
(0.00) 0.01 – (0.02) (0.09) (126.60) – (126.71)Receivables/Debtors
Balance as at 01.07.2004 – – – – – – – –Additions during the period – – 0.72 – – – – 0.72
– – (0.21) – – – – (0.21)Realizations during the period – – 0.72 – – – – 0.72
– – (0.21) – – – (0.01) (0.22)Balance as at 30.09.2005 – – – – – – – –
– – – – – – – –Payables
Balance as at 01.07.2004 – 0.02 0.16 – – – – 0.19Additions during the period – – 20.56 – – – – 20.56
– (0.02) (14.98) – – – – (15.01)Payments made during the period – – 6.01 – – – – 6.01
– – (16.76) – – – (0.06) (16.82)Balance as at 30.09.2005 – 0.02 14.71 – – – – 14.73
– (0.02) (0.16) – – – – (0.19)
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 17 : RELATED PARTY DISCLOSURES (Contd.)
ESCORTS LIMITED
84
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
TRANSACTIONS WITH JOINT VENTURES (Contd.) (Rs. Crores)
Nature of Transactions Escorts Escotrac Carraro Escorts Hughes Escorts Escotel TotalFinance Finance & India Ltd. Motors Escorts Telecomm- Mobile
Investment & Investment Ltd. Communi- unications Communi-Leasing Ltd. Pvt. Ltd. cations Ltd. cations
Ltd. Ltd.#
TRANSACTIONS WITH ASSOCIATES
(Rs. Crores)
Nature of Transactions Escorts Auto Escorts TotalComponent Ltd. # Finance Ltd *
Sale of goods – – –– – –
Rendering of services (Income) – – –(0.16) (0.12) (0.28)
Rent Income – – –– (0.03) (0.03)
Purchases of goods – – –(0.12) – (0.12)
Receiving of services – – –(0.47) (0.07) (0.54)
Financial transactionsa) Interest expense – – –
– (0.84) (0.84)b) Discounting charges paid – – –
– (2.50) (2.50)Management contracts including for deputation of employees – – –
(0.35) – (0.35)Fixed assets
Leasing or hire purchase arrangements – – –– (0.09) (0.09)
InvestmentsBalance as at 01.07.2004 – – –Purchased during the period – – –
– – –Sold/Adjusted during the period – – –
(0.40) (13.51) (13.90)Balance as at 30.09.2005 – – –
– – –
SCHEDULE 17 : RELATED PARTY DISCLOSURES (Contd.)
Provisions (Debts/Loans/Advances/Deposits/Investments)Balance as at 01.07.2004 – – – – 0.07 197.04 – 197.11Additions during the period – – – 31.25 – – – 31.25
– – – – – (197.04) – (197.04)Write off out of existing Provisions – – – – – – – –
– – – – – – – –Write back of Provisions – – – – – – – –
– – – – – – – –Balance as at 30.09.2005 – – – 31.25 0.07 197.04 – 228.36
– – – – (0.07) (197.04) – (197.11)Amounts directly written off – – – – – – – –
NOTES :1. The full amount of transactions and balances with Joint Ventures have been reported here although the same have been considered proportionately in the
preparation of Consolidated Balance Sheet and Profit and Loss Account.2. # Ceased to be a related party during 2003-04. Hence disclosures for current period not applicable.3. The figures in brackets pertains to previous year.
Annexure - I (contd)
85
Advances Given (incl Running accounts)Balance as at 01.07.2004 – (0.01) (0.01)Additions during the period – – –
(1.43) (0.69) (2.12)Returned/Adjusted during the period – – –
(1.83) (2.58) (4.41)Balance as at 30.09.2005 – – –
– 0.01 0.01Receivables / Debtors
Balance as at 01.07.2004 – – –Additions during the period – – –
(0.35) – (0.35)Realizations during the period – – –
(0.46) – (0.46)Balance as at 30.09.2005 – – –
PayablesBalance as at 01.07.2004 – – –Additions during the period – – –
– (161.30) (161.30)Payments made during the period – – –
– (185.52) (185.52)Balance as at 30.09.2005 – – –
– – –Provisions (Debts/Loans/Advances/Deposits) – – –
Balance as at 01.07.2004 – – –Additions during the period – – –
– – –Write off out of existing Provisions – – –
– – –Write back of Provisions – – –
– – –Balance as at 30.09.2005 – – –
– – –Amounts directly written off – – –
NOTES :1. # Ceased to be a related party during 2003-04. Hence disclosures for current period not applicable.2. * Ceased to be a related party during 2003-04. Hence disclosures for current period not applicable.3. The previous year figures have been re-classified to the extent these pertains to Farmtrac North America LLC., USA
(formerly Long Agri Business LLC USA) and Escotoonz Entertainment Pvt. Ltd.4. The figures in brackets pertains to previous year.
TRANSACTIONS WITH ASSOCIATES (Contd.)(Rs. Crores)
Nature of Transactions Escorts Auto Escorts TotalComponent Ltd. # Finance Ltd *
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL(Rs. Crores)
Nature of Transactions Mr. Rajan Nanda Mr. Nikhil Nanda@ Total
Managerial Remuneration Paid 0.25 0.27 0.52(0.41) (0.40) (0.81)
@ Key Management Personnel upto 16th August, 2005.
NOTE : The figures in brackets pertains to previous year.
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 17 : RELATED PARTY DISCLOSURES (Contd.) Annexure - I (contd)
ESCORTS LIMITED
86
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 18 : SEGMENT INFORMATION FOR THE PERIOD ENDED SEPTEMBER 30, 2005I) INFORMATION ABOUT PRIMARY BUSINESS SEGMENTS
Rs. Crores
Agri- Construction Telecom Healthcare Railway Auto Other Unallocated Consolidatedmachinery Equipment Equipments Ancillary Operations Total
Products Products
Revenue 1,340.09 250.25 31.73 353.17 130.90 109.81 35.20 516.88 2,768.03(950.38) (147.04) (259.11) (327.15) (100.19) (105.12) (54.99) (86.41) (2,030.39)
Less: Inter-segment 19.77 1.48 – – 1.07 4.98 0.68 2.90 30.88(16.31) (0.50) (0.30) (0.15) (0.93) (1.83) (3.03) (2.05) (25.10)
Revenue - External 1,320.32 248.77 31.73 353.17 129.83 104.83 34.52 513.98 2,737.15
(934.07) (146.54) (258.81) (327.00) (99.26) (103.29) (51.96) (84.36) (2,005.29)ResultsSegment result (158.65) 15.70 1.20 14.23 12.79 (15.01) (5.36) (135.10)
(-70.75) (2.28) (-101.22) (9.77) (17.75) (-7.13) (-17.29) (-166.59)Other unallocated expenditure 9.14 9.14(net of unallocable income)
(-63.66) (-63.66)Interest Expense (176.53) (176.53)
(-219.17) (-219.17)Interest Income 14.16 14.16
(27.17) (27.17)Dividend Income 0.42 0.42
(0.10) (0.10)Share in Loss of Associates (1.98) (1.98)
(-11.89) (-11.89)Provision for diminution in thevalue of Long term Investments &Loans to Group Cos. (105.91) (105.91)
(–) (–)Provision for Impairment of Assets – –
(-69.43) (-69.43)Surplus on sale of Investments 502.59 502.59
(72.65) (72.65)
Profit before Taxation (158.65) 15.70 1.20 14.23 12.79 (15.01) (5.36) 241.89 106.79
(-70.75) (2.28) (-101.22) (9.77) (17.75) (-7.13) (-17.29) (-264.23) (-430.82)Provision for Taxation:- Current Tax 42.22 42.22
(11.60) (11.60)- Deferred Tax (56.04) (56.04)
(-115.92) (-115.92)
Profit after Tax (158.65) 15.70 1.20 14.23 12.79 (15.01) (5.36) 255.71 120.61
(-70.75) (2.28) (-101.22) (9.77) (17.75) (-7.13) (-17.29) (-159.91) (-326.50)
Other InformationSegment Assets 921.85 119.69 32.42 – 67.81 61.99 150.41 608.18 1,962.35
(857.96) (67.84) (32.10) (287.23) (61.60) (64.96) (145.75) (591.30) (2,108.74)Segment Liabilities 371.44 63.32 13.58 – 12.80 22.39 23.56 1,005.99 1,513.08
(302.35) (35.71) (11.19) (43.67) (11.62) (20.75) (41.52) (1,080.81) (1,547.62)Additions to Tangible Fixed Assets 55.48 1.64 5.43 – 5.35 2.76 3.25 4.83 78.74
(19.18) (0.86) (2.35) (34.51) (9.16) (8.09) (0.82) (1.75) (76.72)Additions to Intangible Fixed Assets 0.41 1.72 – – – 0.03 4.04 – 6.20
(9.19) (0.52) – (34.58) (0.08) (0.04) (2.00) – (46.41)Depreciation and Amortisation 50.37 2.64 4.23 33.16 3.87 3.55 5.46 9.29 112.57
(56.02) (2.27) (94.36) (43.03) (4.01) (3.98) (9.13) (9.22) (222.02)Non-Cash Expenses other thanDepreciation & Amortisation 68.68 4.00 1.07 0.53 1.79 0.38 3.31 112.56 192.32
(7.76) (0.89) (159.34) – (0.07) (0.30) (9.51) (1.05) (178.92)
ii) INFORMATION ABOUT SECONDARY GEOGRAPHICAL SEGMENTS
India Outside ConsolidatedIndia Total
Revenue by Geographical Market-External 2,246.75 490.40 2,737.15(1,846.97) (158.32) (2,005.29)
Carrying amount of Segment Assets 1,712.72 249.63 1,962.35(2,063.63) (45.11) (2,108.74)
Addition to Tangible Fixed Assets 28.78 49.96 78.74(74.09) (2.63) (76.72)
Additions to Intangible Fixed Assets 5.79 0.41 6.20(44.45) (1.96) (46.41)
87
iii) Notes:(a) The Company is organised into seven main business segments, namely;
– Agri-machinery Products : comprising of Tractors, Combines, Spares and Agri products.
– Auto Ancillary Products : comprising of Shock Absorbers, Telescopic Front Forks and McPherson Struts.
– Railway Equipments : comprising of Shock Absorbers, Couplers and Brake Blocks.
– Construction Equipments : comprising of Earthmoving equipment, Material handling equipment, Roadconstruction equipment etc.
– Healthcare Services : comprising of Super-special heart care and various other multi speciality medicalfacilities. Healthcare business has been divested during the period.
– Telecom Services : comprising of Cellular and V-Sat Telecommunication Services. Cellular businesswas divested during the previous period.
– Other Operations : comprising of Software Development, Internet Service Provider and otherE-Commerce services, Financial and Investment services.
The segments have been identified and reported taking into account, the nature of products and services, the differing risksand returns, the organisation structure, and the internal financial reporting systems.
(b) Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable with each of the segments andare determined before intra-enterprise balances and intra-enterprise transactions are eliminated as part of the process ofpreparation of enterprise financial statements, except to the extent that such intra-enterprise balances and transactions arewithin a single segment.
Segment Revenue and Results does not include interest income, dividend income, interest expense, profit/(loss) on sale ofinvestments/assets, other exceptional provisions or losses, income tax provisions and corporate expenses/incomes.
Segment Assets and Liabilities does not include any interest or dividend generating assets, interest bearing liabilities, incometax assets/liabilities and corporate assets/liabilities.
Such exclusion from Segments as mentioned above have been grouped under the head ‘Unallocables’.
(c) Segment Revenue in the geographical market considered for disclosure are as follows:
– Revenue outsides India includes sales to customers located outside India and earnings outside India
– Revenue within India includes sales to customers located within India and earnings in India
– Carrying amount of Segment assets has been determined by location of assets
– Additions to tangible and intangible fixed assets has been determined by location of assets
(d) Figures in brackets pertains to previous year.
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 18 : SEGMENT INFORMATION FOR THE PERIOD ENDED SEPTEMBER 30, 2005 (Contd.)
SCHEDULE 19 : NOTES ON CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
1.1 During the previous period ended 30th June 2004, the Commpany had entered into an agreement to divest its entire holding of equityin the telecom subsidiary Companies i.e. Escotel Mobile Communications Limited (EMCL) and Escorts Telecommunications Limited(ETL). The sale transaction in case of EMCL was completed on 10th June, 2004 but the ETL transaction is yet to be completed. Thenet loss of Rs.177.61 crores arising on account of the loss of investment as well as for loans given to the above two mentionedsubsidiaries, was provided during the previous period. The loss is after taking into account the gain of Rs.88.11 crores arising fromthe assignment of the shareholders’ subordinated debt by the joint venture partner in favour of Escorts Limited. The consequentialaggregate shareholders’subordinated debt of Rs.175.74 crores is redeemable in January, 2014. However, the borrower EMCL hasan option of early redemption at a discount rate of 10.50% per annum and the Company has a put option in January 2010. Thesubordinated Debt (Bond) of Rs.175.74 crores is included in ‘investments’. The difference between the book value of Rs.175.74crores and the realizable value (NPV) of Rs.117.87 crores in January 2010 has been provided during the current period.
1.2 During the year, the Company has assigned the above referred Bond of Idea Mobile Communication Limited (Idea) to UTI Bank Ltd.(Bank) to avail financial assistance. Idea has a call option exercisable at any time. On payment by Idea to the Bank, the Company willreceive any surplus after deducting dues to Bank on account of loan amount, contingent liabilities to the extent set off by Idea and anyoutstanding interest / penal interest and charges. The Bank has also retained a cash margin whose book value of Rs.9.45 crore isincluded in ‘fixed deposits with Scheduled Banks’ (pledged) in Schedule 6.
2.1 Consequent to an agreement dated 31st March, 2000 between the Company and Hughes Network Systems (HNS), the jointventure partner of the company in Hughes Escorts Communication Limited (HECL), and ICICI Bank Ltd. (ICICI), the Company sold34,50,000 equity shares of HECL to Escorts Motors Limited (EML). HNS and ICICI thereafter subscribed to the equity share capital
ESCORTS LIMITED
88
of EML equally to hold 98% of its total equity share capital. Under the terms of the agreement, the Company had given an assuranceto HNS and ICICI of a minimum return compounded annually for a period of four years.
2.2 Subsequent to 31st March, 2004, the Company has in terms of earlier agreement agreed to purchase the 49% holding in EML, fromICICI and had advanced Rs.68 crores out of which Rs.31.25 crores has been provided as diminution in the value of proposedinvestment, being the differential in excess of the original investment made by ICICI. The transfer of the shares in favour of theCompany is awaited pending final settlement with ICICI. The amount of Rs. 68 crores remains grouped under Advances recoverablein ‘cash or kind’ in Schedule 7 Loans & Advances. Discussion are in progress with HNS for a final settlement and the assurance ofreturn has ceased accruing on 31st March 2003, as mutually agreed.
3 Divestment of Escorts Heart Institute & Research Centre Limited (EHIRCL) :
3. 1 During the year, the Company had sold its entire shareholding in EHIRCL for consideration of Rs. 520 crores vide SalePurchase Agreement dated 25th September 2005. The sale proceeds have been received, out of which Rs.85.08 crores hasbeen retained in an Escrow Account, awaiting fulfillment of certain conditions. For the purpose of consolidation, the gain or losson disposal of interest in EHIRCL has been represented by the difference between Company’s share in net assets of EHIRCLas on the date of disposal and disposal proceeds. On the date of disposal, the Company has a share of brought forwardaccumulated reserves and surplus in EHIRCL of Rs.164.14 crores and after taking into account the profits of the current yearamounting to Rs.8.30 crores and an investment of Rs.1.60 crores the total share in net assets in EHIRCL as on the date ofdisposal is Rs. 174.07 crores. The disposal consideration net-off brokerage is Rs. 507.11 crores and thus results in a gain ofRs. 333.04 crores. However, the brought forward accumulated reserves of Rs.164.17 crores have been adjusted directly in thereserves and therefore the sales consideration net of investments and current year profit adjustment amounting to Rs. 497.21crores is credited to the consolidated profit and loss account.
3.2 The Hon’ble Delhi High Court has ordered status quo, on a petition filed in this matter. The Company has recognized the salein these Accounts and has also obtained legal opinion, which has advised that there is no adverse effect on the sale transaction,in view of the High Court Order.
3.3 The Tax authorities had raised a demand of tax amounting to Rs.52.33 crores and interest thereon amounting to Rs.29.16crores on EHIRCL which is under appeal. The Company has undertaken vide the above mentioned sale agreement to indemnifythe purchaser to the extent of Rs.65 crores and one-third of any excess in case the appeal is decided against the Company.
4.1 The Net Owned Funds (NOF) of Escorts Automotives Limited (EAL) has fallen below the limits prescribed under the NBFC Regulationssince the last three years.
4.2.1 Till last year, Escorts Construction Equipment Limited (ECEL) had unrecognized deferred tax assets amounting to Rs.157,817,576which could not be recognized due to lack of virtual certainty that sufficient taxable income will be available in future against whichdeferred tax assets can be realized. During the current financial year 2004-05, ECEL has reported significantly improved financialresults. This coupled with favorable growth projection for the construction equipment industry in general and ECEL in particularmakes the management confident that sufficient taxable income for realizing deferred tax assets will be available in future. Accordingly,ECEL has recognized deferred tax assets (including previously unrecognized deferred tax assets) resulting from all relevant timingdifferences as on 30th September, 2005.
4.2.2 In the case of ECEL, the balance outstanding against Sundry Debtors, Loans & Advances, Sundry Creditors are subject to reconciliation/confirmation by the respective parties. Pending complete reconciliation and confirmation of balance Rs.74,627,787 of Debtor andRs.14,262,879 of Loans & Advance have been classified as doubtful and a provision for the same has been made. Shortfall inprovision, if any, will be made after completion of reconciliation and confirmation from respective parties.
4.2.3 ECEL has given a corporate guarantee of Rs. 107 crores in favour of UTI Bank Limited to secure loan taken by the Company (EscortsLimited - the holding Company). The principal amount of the loan taken by Escorts Limited is adequately secured by assignment ofBond (unsecured subordinated loan) held by it. However, the corporate guarantee is subject to approval by the Guarantor’s bankers/lenders. The said loan arrangement of the Company is also backed by a second charge on ECEL’s current assets and movable fixedassets.
4.3 During the year 2004-05, Escorts Telecommunications Limited(ETL) had deposited liquidated damages of Rs.3.00 crores withDepartment of Telecommunications (DoT), Delhi under protest as the delay in commencement of services in three circles namely;UP (East), Rajasthan and Himachal Pradesh is attributable to the delay on the part of WPC wing of DoT. As the authorities have beenapproached for the waiver of the same, the said amount of Rs. 3 crores has been shown as claims recoverable under the head Loans& Advances of the Balance Sheet of ETL, which has been considered for consolidation.
4.4 Escorts Agri Machinery Inc., USA, (EAMI) a wholly owned subsidiary, whose financial statements reflect total assets of Rs. 250.10crores ( US$ 57.80 million, converted at 1US$= Rs.43.27) as at December 31, 2004 and the total revenues of Rs.283.61 crores(US$ 63.47 million, converted at 1 US$ = Rs.44.47) for the year then ended has been considered in the preparation of consolidatedfinancial statements on the basis of audited financial statements and other financial information upto December 31, 2004.
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
89
5. Net Deferred Tax Assets/(Liabilities) as at 30th September 2005 comprises of the following:
(Rs. Crores)
Net Deferred Tax Asset
Deferred tax assets/ Credit/(charge) Deferred tax assets/Particulars (liabilities) as at during the (liabilities) as at
01.07.2004 period 30.09.2005
Accumulated Losses 38.54 (25.74) 12.80Depreciation – – –Unabsorbed Depreciation 5.69 (0.30) 5.39Deferred Revenue Expenditure (4.14) 4.94 0.80Disallowance u/s 43 B 17.73 5.31 23.04Provision for Doubtful Debts/Loans/Advances 64.84 62.79 127.63Others 0.48 (0.10) 0.38
Total 123.14 @ 46.90 170.04
(Rs. Crores)
Net Deferred Tax Liability
Deferred tax assets/ Credit/(charge) Deferred tax assets/Particulars (liabilities) as at during the (liabilities) as at
01.07.2004 period 30.09.2005
Accumulated Losses – –Depreciation 87.38 (9.33) 78.05Unabsorbed Depreciation – – –Deferred revenue expenditure (0.14) 0.19 0.05Disallowance u/s 43 B – – –Provision for Doubtful Debts – – –Others – – –
Total 87.24 @ (9.14) 78.10
@ Opening balance of net deferred tax asset has been adjusted for net amount of Rs.8.18 crores mainly related to EscortsHeart Institute and Research Centre Limited, which ceased to be a subsidiary on 28th September, 2005.
6. Contingent Liability 2004-05 2003-04
i) Estimated amounts of contracts remaining to be executed oncapital account not provided for 5.78 31.67
ii) * Claims not acknowledged as debts 4.65 43.27iii) There is a Contingent liability of :
* (a) Excise duty demands not acknowledged as liability 37.96 43.92* (b) Others not acknowledged as liability till a demand is raised – –* (c) ESI additional demand not acknowledged as liability 11.96 11.71* (d) Sales Tax / Income Tax demand not acknowledged as liability 3.50 1.88@ (e) Demand raised by Income Tax department, disputed by the 44.86 45.00
Company and appeal has been filed* (f) Pending Legal Cases - Personnel 3.43 3.19* (g) Faridabad Municipal Corporation
(litigation against demand for external development charges) 2.38 2.38* (h) Bills discounted with Banks/Financial Institutions 31.71 –
Gross 135.80 108.08
Net of Tax 90.08 68.53
(i) Guarantees executed in favour of Customs/Excise Authorities 9.33 9.04(j) Guarantees (financial and performance) to Banks and Financial Institutions 22.88 40.43
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
ESCORTS LIMITED
90
Note *:
The amounts indicated as contingent liability or claims against the Company only reflect the basic value, interest or legalcosts, being indeterminable, not considered.
@ In the year 2004-05, an addition of Rs.88 crores had been made by the Income Tax Department, being 80% of the net worthof Escorts Heart Institute & Research Centre Limited (erstwhile subsidiary of the Company), along with a few disallowance andhence created a demand of Rs.53.08 crores. After first appeal, considering the relief allowed by CIT (Appeals), the reviseddemand works out to Rs. 44.86 Crores.
The appeal is pending before the Income Tax Appellate Tribunal. According to the Company, the demand shall not surviveafter the appeals since it is highly contentious and debatable. However, an amount of Rs. 35.45 crores has been adjusted /paid till date under protest.
7. Earnings per Share (EPS) 2004-05 2003-04
(a) Profit/(Loss) after tax attributable to the Company (Rs. Crores) 120.84 (325.38)
(b) Total number of Equity Shares 6,20,46,835 6,20,34,335
(c) Basic and Diluted Earnings Per Share (Rupees) 19.48 (52.45)
8. Miscellaneous expenditure (to the extent not written off or adjusted) represents:
2004-05 2003-04
(a) Development expenditure 4.97 10.66Add : Additions during the year 1.08Less : Written off during the year 3.04 3.01 5.69 4.97
(b) Payments under Voluntary Retirement Scheme 10.84 12.04Add : Additions during the year 2.07 7.43Less : Written off during the year 5.10 7.81 8.63 10.84
(c) Upfront fees 0.23 1.59Add : Additions during the year 9.75Less : Written off during the year 1.49 8.49 1.36 0.23
(d) Preliminary Expenditure 0.14 0.24Add : Additions during the year – 0.11Less : Written off during the year 0.05 0.09 0.21 0.14
(e) Other Deferred Revenue Expenditure 0.70 1.62Add : Additions during the year 2.29 0.03Less : Written off during the year 0.41 2.58 0.95 0.70
Total 21.98 16.88
9. In accordance with Accounting Standard (AS-19) “Leases” the disclosure under various leases is given in Annexure:
In accordance with AS-19 (Leases) disclosures under various leases are hereunder :
A) Assets acquired under finance lease during the period 2004-05:
(Rs. in crores)
Category of Fixed Asset Furniture & Fixtures Equipments Vehicles
Total addition during the period 3.70 – 0.88(1.91) (–) (1.80)
Opening Original Cost 1.22 0.26 0.60 *(1.22) (0.26) (0.68) *
Addition under finance lease arrangement during the period – – 0.24(–) (–) (0.40)*
Deletion during the period 1.22 0.26 –(–) (–) (0.48)
Closing Gross Block – – 0.84(1.22) (0.26) (0.60)
Cumulative Depreciation on assets under finance lease – – 0.33(0.74) (0.17) (0.16)
Net carrying value as on 30th September 2005 – – 0.51(0.48) (0.09) (0.44)
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
91
The details of amounts of minimum lease payments outstanding as on 30th September 2005 and present value thereof are as under:
(Rs. in crores)
Minimum Present value Future interestlease payments of minimum on outstanding
outstanding lease payments lease paymentsoutstanding
2004-05 2003-04 2004-05 2003-04 2004-05 2003-04
Total Amount due 0.36 1.38 0.31 0.90 0.05 0.48Due within one year 0.18 0.74 0.15 0.59 0.03 0.15Due later than one year and not later than five years 0.18 0.64 0.16 0.31 0.02 0.33
All the lease arrangements are upto four years.
B) Assets taken on Operating Cancellable Leases :
The total of lease payments recognised in profit and loss statement for the period ended 30th June, 2004 is Rs 0.20 crores (Previousyear – Rs. 3.26 crores).
The cancellable operating leases pertaining to offices premises and vehicles.
C) Assets taken under Non-cancellable Operating Leases :
The details of future minimum lease payments under non-cancellable operating leases are as under –
(Amount in crores)
i) Due within one year 0.43(0.11)
ii) Due later than one year and not later than five years 0.53(0.53)
iii) Due later than five years –(0.35)
The non-cancellable operating lease pertains to office equipments.
10. Proportionate share of joint ventures in the following line items is given below as there is no separate schedule attached:
2004-05 2003-04
– Gross Sales 99.53 59.16Less: Excise 12.92 4.83Net Sales 87.01 54.32
– Depreciation 9.21 7.96– Provision for Taxation:
Current Taxation 0.64 1.18Deferred Taxation 0.46 (0.08)
– Deferred Tax Assets 2.25 2.52– Investments 56.14 53.44– Miscellaneous Expenditure (to the extent not written off or adjusted) 2.33 0.00*– Contingent Liability 16.47 15.80
* (Rs. 39,350/-)
11. Current accounting period is for 15 months from July 1, 2004 to September 30, 2005 and is comparable with the previous period.Previous period figures have been regrouped wherever necessary, to conform to the current period classification.
SCHEDULES 1-19 FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT
SCHEDULE 19 : NOTES ON BALANCE SHEET AND PROFIT & LOSS ACCOUNT (Contd.)
RAJAN NANDA NIKHIL NANDA DR. M.G.K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S.A. DAVE DR. P.S. PRITAM S.C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficeCompany Secretary
As per our report attachedFor S.N. DHAWAN & CO.
Chartered AccountantsC-37, Connaught PlaceNew Delhi - 110 001 VIJAY DHAWANDated : January 20, 2006 Partner
M.No. 12565
ESCORTS LIMITED
92
CONSOLIDATED CASH FLOW STATEMENT OF ESCORTS LIMITED
Period ended Period ended
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit/(Loss) before tax 106.79 (430.82)
Adjustments for :
Depreciation 102.49 205.18
Misc. Exp./ Assets Write off / Provisions/Adjustments 171.55 30.51
Pre-operative expd pending allocation w/off – 87.31
Impairment of assets – 69.43
Interest Expense 176.53 219.17
Surplus on sale of investments (500.61) (72.65)
Dividend Income (0.42) (0.10)
Interest Income (14.16) (27.17)
Operating Profit before working capital changes 42.17 80.86
Adjustments for :
Trade and other Receivables (111.27) (58.93)
Inventories (97.87) (15.37)
Trade Payables 133.38 74.43
Miscellaneous Expenses (15.51) (7.57)
Cash Generated from Operations (49.10) 73.42
Direct Taxes Paid (net of refunds received) (22.28) (16.44)
Net Cash Flow from operating activities (71.38) 56.98
B. CASH FLOW FROM INVESTING ACTIVITIES
Payment of licence fees / pre-operative expenditure (0.16) (1.64)
Purchase of Fixed Assets (84.85) (118.63)
Sale of Fixed Assets 14.18 152.41
Purchase of Investments (2.91) (73.63)
Proceeds from Sale of Investments 519.16 196.00
Margin Money in Escrow Account (85.08) –
Interest Received 14.16 28.76
Dividend Received 0.42 0.10
Net Cash used in Investing activities 374.92 183.37
93
CONSOLIDATED CASH FLOW STATEMENT OF ESCORTS LIMITED (Contd.)
Period ended Period ended
30.09.2005 30.06.2004
Rs. Crores Rs. Crores
C. CASH FLOW USED IN FINANCING ACTIVITIES
Proceeds from Issue of Share Capital 0.01 0.09
Proceeds from Long Term Borrowings 86.24 273.10
Less: Repayment of long term borrowings 168.56 (82.32) 329.22 (56.12)
Net Proceeds from Short Term Borrowings (5.34) (8.83)
Interest Paid (176.53) (218.23)
Dividend Paid – (7.22)
Dividend Tax Paid – (0.93)
Net Cash used in financing activities (264.18) (291.24)
Net Increase/(Decrease) in Cash and Cash equivalents 39.36 (50.89)
Cash and Cash equivalents as at 01.07.2004 24.92 75.81
Cash and Cash equivalents as at 30.09.2005* 64.28 24.92
NOTE :
1. * Cash and Cash equivalents include Cash-in-hand, Demand Deposits with Banks and Short-term highly liquid investments.
2. Previous years figures have been regrouped wherever necessary.
RAJAN NANDA NIKHIL NANDA DR. M.G.K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S.A. DAVE DR. P.S. PRITAM S.C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
As per our report attachedFor S.N. DHAWAN & CO.
Chartered AccountantsC-37, Connaught PlaceNew Delhi - 110 001 VIJAY DHAWANDated : January 20, 2006 Partner
M.No. 12565
ESCORTS LIMITED
94
STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.
Sr. Name of the Company Share Capital Reserves & Total Assets
No. Surplus
Total Total Total Deferred Misc.
Fixed Investment Current Tax Expenditure
Assets Assets Assets
1 Escorts Construction Equipment Limited 710,000.00 - 172,948.14 140.40 784,448.29 131,047.73 7,613.82
2 Escorts Agri Machinery Inc.
(1US$ = Rs. 43.58) 413,002.39 - 196,177.37 2,179.00 2,320,599.00 - -
3 Farmtrac Tractors Europe Spolka Zo.o.
(1PLN = Rs. 14.601) 87,606.00 173,836.98 29,143.10 - 176,393.19 - -
4 Farmtrac North America LLC (USA)
(1US$ = Rs. 43.58) 95,047.81 ̂ - 167,371.87 2,179.00 2,117,075.52 - -
5 Beaver Creek Holdings LLC (USA)
(1US$ = Rs. 43.58) 32,778.39 ̂ - 167,371.87 2,179.00 2,141,966.11 - -
6 Escosoft Technologies Ltd. 188,001.50 - 5,772.87 69,573.75 57,357.18 - -
7 Escosoft Technologies (USA) Ltd. 9,766.96 - - - 86.54 - -
8 Escosoft Technologies (UK) Pvt. Ltd.
(1GBP= Rs. 82.39) 25,174.84 - 92.93 18,454.23 250.22 - -
9 Escosoft Singapore Pte. Ltd.
(1S$ = Rs. 26.52) 4,508.40 - - - 444.08 - -
10 E-Soft (Mauritius) Holding Ltd. 21,497.81 - - - 21.13 - -
11 IFS Solutions India Pvt. Ltd. 15,000.00 215.76 18,133.24 - 49,023.08 769.85 -
12 CA - Escosoft Ltd. 39,500.00 - 0.00 - 17,586.94 - -
13 Escorts Automotives Ltd. 100,000.00 1,426.62 3,075.05 68,946.46 747,969.26 2,552.00 -
14 Escorts Securities Ltd. 62,000.00 13,512.86 5,805.87 1,391.21 197,385.42 3,456.45 235.00
15 Escorts Asset Management Ltd. 110,000.00 12,425.68 1,813.40 19,698.00 102,341.30 - 2,281.43
16 Esconet Services Ltd. 693,028.00 - 9,268.72 445,403.95 66,948.30 - -
17 Cellnext Solutions Ltd. 210,703.30 - 5,141.42 - 39,485.76 2,633.90 -
18 iServ India Solutions Pvt. Ltd. 190,000.25 - 7,699.25 - 23,563.89 - -
19 Automatrix India Pvt. Ltd. 48,006.00 - 590.07 - 134.26 - -
20 Escorts Telecom Services Ltd. 500.00 - - - 396.28 - 4.44
21 Escorts Health Care Services Ltd. 500.00 - - - 419.49 - 484.83
22 Escorts Telecommunications Ltd. 610,000.00 1,414,561.00 654,422.00 - 55,103.00 - -
23 Escotoonz Entertainment Pvt.. Ltd. 60,000.00 - 47,143.57 - 5,167.66 1,588.10 -
NOTES :1 The Annual Accounts alongwith the Reports thereon of the subsidiary companies are not being attached in view of the exemption granted by Government of India, Ministry of Companies
Affairs. The said annual accounts and the related detailed information will be made available to the holding and subsidiary Companies’ investor seeking such information, at any point of time(during the business hours). The annual accounts of the subsidiary companies will also be kept for inspection by any investor at the head office of the Company/subsidiary companies.
2 ̂ The above figures is net of reserve & surplus as per US GAAP.
95
Total Liabilities Details of Turnover Profit Provision Profit Proposed
Investment before Tax for Tax after Tax Dividend
Pre-operative Profit & Total Deferred Tax Current Other than
Exp. Pending Loss Loans Liability Liability & in Subsi-
Allocation Provisions diaries
- 225,306.17 115,899.76 - 495,604.79 140.40 1,552,297.87 49,758.86 (128,270.60) 178,029.46 -
- 330,987.49 - - 2,436,940.48 - 2,729,500.29 (69,287.19) - (69,287.19) -
- 55,906.70 - - - - 388,186.34 20,642.76 - 20,642.76 -
- - - - 2,191,578.58 - 2,316,398.07 (9,179.21) - (9,179.21) -
- - - - 2,278,738.58 - 2,316,398.07 (99,514.84) - (99,514.84) -
- 173,833.62 87,420.26 - 31,115.66 - 16,517.48 (17,612.66) - (17,612.66) -
- 9,781.59 - - 101.17 - - (425.13) - (425.13) -
- 6,610.04 - - 232.58 - - (277.54) - (277.54) -
- 4,077.80 - - 13.48 - - (153.84) - (153.84) -
- 21,476.68 - - - - - (38.13) - (38.13) -
- - 783.90 - 51,926.51 - 76,435.80 15,594.24 7,720.54 7,873.70 -
- 25,156.42 - - 3,243.36 - - 6.87 444.36 (437.49) -
- 232,424.51 903,980.11 - 49,560.54 68.95 58,458.44 (27,874.63) 7,775.42 (35,650.04) -
- - 60,472.45 - 72,288.62 1.39 37,244.89 810.37 (33.22) 843.59 -
- - - 274.74 3,433.71 (19,678.30) 16,564.39 2,958.02 2,567.58 390.44 -
- 224,390.33 - - 52,983.31 (444,958.55) - (23,973.49) - (23,973.49) -
- 189,483.77 1,091.05 - 24,950.49 - 60,733.91 3,072.85 (507.42) 3,580.27 -
- 273,825.57 60,000.00 - 55,088.46 - - (13,921.12) - (13,921.12) -
51,565.63 - - - 4,283.96 - - - - - -
484.02 - 362.23 - 22.50 - - - - - -
- - 388.17 - 16.16 - - - - - -
- 1,373,647.00 55,813.00 - 2,798.00 - - (78,482.00) - (78,482.00) -
- 28,869.08 11,014.41 - 11,754.00 - 15,490.63 (26,214.26) (1,588.10) (24,626.15) -
RAJAN NANDA NIKHIL NANDA DR. M.G.K. MENONChairman and Executive Director & COO DirectorManaging Director
DR. S.A. DAVE DR. P.S. PRITAM S.C. BHARGAVADirector Director Director
G.B. MATHUR SHAILENDRA TANDONVice President - Law & Group Chief Financial OfficerCompany Secretary
Dated : February 28, 2006
(Rs. ’000)
