Dec 31, 2022
Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of ? 2/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees.
The Board of directors have recommended dividend of ? 5.50 per equity share for the year ended December 31, 2022. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
Retained earnings are the profits of the Company earned till date net of appropriations/distributions and other adjustments permitted as per the applicable regulations and accounting standards.
c) Employee stock option reserve
The share options outstanding account is used to recognise the grant date fair value of the options issued to employees under Employee Share Acquisition Plan schemes.
Capital reserve pertains to acquisitions in the earlier years.
The Company had transferred to Capital Redemption reserve, a sum equal to the nominal amount of preference shares that were redeemed in the past. The reserve will be utilized as per the provisions of the Companies Act 2013.
General reserve is a free reserve which can be utilised for any purpose after fulfilling certain conditions in accordance with the provisions of the Companies Act, 2013.
i) Warranties: The Company provides warranties for its products, systems and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at December 31, 2022 represents the amount of the expected cost based on technical evaluation and past experience of meeting such obligations. It is expected that this expenditure will be incurred over the contractual warranty period.
ii) Loss orders: A provision for expected loss on construction contracts is recognised when it is probable that the contract costs will exceed total contract revenue. For all other contracts loss order provisions are made when the full costs of meeting the obligation under the contract exceed the currently estimated economic benefits.
iii) Provision for litigation represents claims against the Company not acknowledged as debts that are expected to materialise in respect of matters in litigation. The outflow would depend on the cessation of the respective events.
iv) Provision for sales tax represents mainly the differential sales tax liability on account of non - collection of declaration forms. The outflow would depend on the cessation of the respective events.
On March 5, 2019, the Board of Directors of Company approved the Scheme of Arrangement amongst the Company and Hitachi Energy India Limited (âHEILâ) (formerly ABB Power Products and Systems India Limited) for Demerger of Companyâs Power Grids business to HEIL ("Demerger") and the Appointed date for the Demerger was April 1, 2019. The Demerger was approved by National Company Law Tribunal (âNCLTâ) and the NCLT approval was filed with the Registrar of Companies on December 1, 2019 (Effective date).
35 During the year, the Company sold its turbocharger business (which was part of Process Automation segment) to a wholly owned subsidiary Turbocharging Industries and Services India Private Limited (âTISIPLâ), on a slump sale basis for a consideration of ? 310 Crores determined based on independent valuation. This was in line with ABB Group''s ongoing systematic portfolio restructuring to focus on higher growth segments. In this regard, a gain on sale of the business amounting to ? 293.35 Crores was recognised as income and was presented as an exceptional item.
Further, the Company has sold the investment in TISIPL to Turbo Systems Switzerland Limited, a fellow subsidiary on the date of sale for a consideration of ? 355 Crores determined based on independent valuation. The gain on sale amounting to ? 40 Crores is recognised as income and presented as an exceptional item.
The Company has also sold certain Property Plant and Equipment to TISIPL during the year and the profit thereon amounting to ? 5.91 Crores is presented as an exceptional item.
37 Gratuity and other post-employment benefit plans
The Company has defined benefit gratuity plan and provident fund plan managed by trusts.
Gratuity is payable to all eligible employees of the Company as per the provisions of the Payment of Gratuity Act, 1972 or as per the Company''s scheme, whichever is higher.
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Provident Fund and Miscellaneous Provisions Act, 1952. The Contribution by employee and employer together with interest are payable at the time of separation from service or retirement whichever is earlier.
Valuation techniques and significant unobservable inputs
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
There were no transfers between Level 1, Level 2 and Level 3 during the year.
The carrying value of trade receivables, loans, trade payables, other financial assets and liabilities and cash and cash equivalents are considered to be the same as there fair value, due to there short term in nature.
The fair value of financial assets and liabilities is included at the amount at which the instruments could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
The Company enters into derivative financial instruments with banks/ financial institutions. Foreign currency forward contracts are valued using valuation techniques which employs the use of market observable inputs using present value calculations. The model incorporates various inputs including the deal specific fundamental, market conditions, maturity period, transaction size, comparable trades, foreign currency spot and forward rates.
39 Financial risk management objectives and policies
The Companyâs principal financial liabilities comprise lease liabilities, trade and other payables. The main purpose of these financial liabilities is to support its operations. The Companyâs principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, liquidity risk and credit risk. The Companyâs senior management oversees the management of these risks. The Companyâs senior management is supported by a Risk management committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The Risk management committee provides assurance to the Companyâs senior management that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include trade payables, deposits, investments and inventories.
Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstanding trade receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
Trade receivables consists of a large number of customers spread across diverse industries.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivable. Under the simplified approach,the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At year end, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount of trade receivable and the amount of the loss is recognised in the statement of profit and loss within other expenses.
Specific allowance for loss is also been provided by the management based on expected recovery on individual customers.
The provision provided in books for trade receivables overdue:
Management does not expect any significant loss from non-performance by counterparties on credit granted during the financial year that has not been provided for.
(ii) Other than trade receivables
Management believes that the parties from which the receivables are due have strong capacity to meet the obligations and risk of default is low and accordingly no provision for expected credit loss has been provided for.
The Company''s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company maintains flexibility in funding by maintaining availability under committed credit lines.
For the purpose of the Company''s capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
The employees of the Company are entitled to the shares of ABB Limited, Zurich (Ultimate holding company) under an equity settled share based plan. Further, under the Long-term incentive plan (LTIP), ABB Limited, Zurich offers stock options to employees above certain grade. The share based payments expense accounted during the year is not material and hence the required disclosures have not been provided.
The Company does not have any contingent assets at the balance sheet date.
The Company is contesting the demands and the management believes that its position will likely be upheld in the various appellate authorities/courts. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company''s financial position.
The amounts assessed as contingent liability do not include interest and/or penalty (if any) that could be claimed by counter parties.
In respect of the above contingent liabilities, the future cash outflows are determinable only on receipt of judgement pending at various forums / authorities.
The Company has outstanding performance bank guarantees as at December 31, 2022 aggregating to ? 60.11 Crores (December 31, 2021 ? 146.62 Crores), issued to the customers of Marici Solar India Private Limited, Linxon India Engineering Private Limited, Dodge Industrial India Private Limited and Turbocharging Industries and Services India Private Limited before the sale of business on slump sale basis to the respective companies. The commission on such bank guarantees has been reimbursed by the respective companies. The Company is also entitled for indemnification by the respective companies against any claims from the customers of these companies on such performance bank guarantees. Additionally, refer note 46(b)(xii).
The total cash outflow for leases during the year is W 29.12 Crores (including interest of W 1.82 Crores) [December 31, 2021: ? 33.73 Crores (including interest of ? 2.23 Crores)], including cash outflow of short-term leases and leases of low-value assets.
45 Segment disclosures45(a) Segment information
The Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by operating segments. For management purposes, CODM organises the company into business units based on its products and services and has five reportable segments, as follows
i) Composition of business segments
The Company''s business segments are organized around products and system solutions provided to its customers, which include utilities, industries, channel partners and original equipment manufacturers.
Motion segment (MO) provides products, solutions and related services that increase industrial productivity and energy efficiency. Its motors, generators and drives provide power, motion and control for a wide range of automation applications.
Robotics and Discrete Automation segment (RA) provides value-added solutions in robotics, machine and factory automation.
Electrification segment (EL) provides technology across the full electrical value chain from substation to the point of consumption, enabling safer and more reliable power. A range of digital and connected innovations for low- and medium-voltage, including EV infrastructure, modular substations, distribution automation, power protection, wiring accessories, switchgear, enclosures, cabling, sensing and control.
Process Automation segment (PA) provides products, systems and services designed to optimize the productivity of industrial processes. Solutions include turnkey engineering, control systems, measurement products, life cycle services, outsourced maintenance and industry specific products. The industries served include oil and gas, power, chemicals and pharmaceuticals, pulp and paper, metals and minerals, marine and turbocharging (discontinued during the year).
Power Grids segment (PG) (Discontinued) offers power and automation products, systems, service and software solutions across the generation, transmission and distribution value chain. Its portfolio includes grid integration, transmission, distribution and automation solutions and a complete range of high voltage products and transformers.
ii) The accounting policies used in the preparation of the financial statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those, which are directly attributable to the segment or are allocated on an appropriate basis. Corporate and other revenues, expenses, assets and liabilities to the extent not allocable to segments are disclosed in the reconciliation of reportable segments with the financial statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimization objective for the Company.
v) Power Grids segment (PG) is considered as discontinued operation. Information about the demerger is provided in Note. 34
vi) Effective January 1, 2021, Erstwhile Industrial Automation segment has been renamed as Process Automation.
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.
There have been no guarantees provided or received for any related party receivables or payables.
In Company''s contracts with customers, since the contractual right to payment arises only upon achievement of milestones specified in the contract, it is believed that the performance completed until the achievement of a particular milestone should be recorded as a contract asset under non-financial assets.
During the year W 39.81 Crores (December 31, 2021 ? 49.43 Crores) from opening balance of contract assets has been reclassified to trade receivables upon billing to customers on completion of milestones.
Revenue recognized during the year from opening balance of contract liabilities amounts to W 135.06 Crores (December 31, 2021 ? 198.59 Crores).
c) There is no revenue recognised during the year from the performance obligation that is satisfied in previous year (arising out of contract modifications).
d) Performance obligation on fixed price contracts
The fixed price contracts are ordinarily presumed to consist of combined obligations which are not distinct in the context of the contract (i.e., single performance obligation). This is highly attributed to the long-term construction nature of the projects, whereby deliverables are typically highly interrelated and combined. The typical scope of turnkey contracts arrangements includes engineering, manufacturing, shipment, delivery installation, testing, erection and commissioning and civil works. Although there are several components to the overall scope of the contract, the turnkey contracts are generally considered one performance obligation.
e) Remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue.
The aggregate value of performance obligations that are completely or partially unsatisfied is W 6,468.71 Crores as at December 31, 2022. The conversion to revenue is highly dependent on meeting the delivery schedules, contractual terms and conditions with customers, availability of customer sites, changes / variation in scope / prices etc. In view of these, it is not practical to define the accurate timing of conversion to revenue. However, it will be in a range of 1 to 3 years.
(a) During the previous year, profit on sale of certain property, plant and equipment amounting to ? 74.53 Crores was disclosed as an exceptional item.
(b) During the previous year, Mechanical Power Transmission business was sold to Dodge Industrial India Private Limited for a consideration of ? 44.58 Crores. The net assets transferred was ? 2.23 Crores (net liability) and profit on sale of business amounting to ? 46.81 Crores was disclosed as an exceptional item.
50 No transactions to report against the following disclosure requirements as notified by MCA pursuant to amended Schedule III:
(a) Crypto Currency or Virtual Currency
(b) Benami Property held under Prohibition of Benami Property Transactions Act, 1988 and rules made thereunder
(c) Registration of charges or satisfaction with Registrar of Companies
(d) Relating to borrowed funds:
i. Wilful defaulter
ii. Utilisation of borrowed funds & share premium
iii. Borrowings obtained on the basis of security of current assets
iv. Discrepancy in utilisation of borrowings
v. Current maturity of long term borrowings
(e) No funds have been advanced or loaned or invested either from borrowed funds or share premium or any other sources or kind of funds by the company to or in any other person or entity, including foreign entities (âIntermediariesâ), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
There are no funds received by the company from any person or entity, including foreign entities (âFunding Partyâ) with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(f) The Company does not have any transactions with struck off companies.
51 The Board of directors in their meeting held on February 10, 2023 have proposed a final dividend of W 5.50 per equity share for the year ended December 31, 2022. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
Dec 31, 2018
1. Corporate information
ABB India Limited (âthe Companyâ) has served utility and industry customers for over six decades with the complete range of engineering, products, solutions and services in areas of Automation and Power technology. The Company has extensive installed base for manufacturing and a countrywide marketing and service presence. Besides catering to Indian domestic market, the Company is also playing an increasing role in the global market.
The Company is a public limited company domiciled in India and incorporated under the provisions of the Indian Companies Act. The registered office is located at Bengaluru. Its shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
The financial statements are approved for issue by the Companyâs Board of Directors on March 1, 2019.
Notes:
a) Other buildings include cost of shares in Lotus Court Private Limited Rs. 0.01 crores.
b) The Company had acquired freehold land of 20 acres 36 guntas on a slump sales basis, in 2011. Out of such free hold land acquired 15 acres and 5 guntas is registered in the Companyâs name and the balance 5 acres and 31 guntas is in the process of being registered.
c) There are no tangible assets given on operating lease.
Goodwill and CGU''s impairment testing
The Company tests whether goodwill has suffered any impairment on an annual basis as at 31 December. The recoverable amount of a Cash Generating Unit (âCGUâ) is determined based on value-in-use calculations which require the use of assumptions. The calculations use pre-tax cash flow projections based on financial budgets approved by the management. An average of the range of each assumption used is mentioned below.
The above discount rate is based on the Weighted Average Cost of Capital (WACC) which represents the weighted average return attributable to all the assets of the CGU. These estimates are likely to differ from future actual results of operations and cash flows.
Based on the above assessment, there has been no impairment of goodwill.
a) Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of Rs.2/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees.
The Board of directors have recommended dividend of Rs.4.80 per equity share for the year ended December 31, 2018. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
a) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act.
b) Employee stock option reserve
The share options outstanding account is used to recognise the grant date fair value of the options issued to employees under Employee Share Acquisition Plan schemes.
c) Debenture redemption reserve
The Company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.
d) Capital reserve
Capital reserve pertains to acquisitions in the earlier years.
e) Capital Redemption reserve
The Company had transferred to Capital Redemption reserve, a sum equal to the nominal amount of preference shares to be redeemed out of the profits available for distribution as dividend.
f) General Reserve
General reserve is created out of profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend and issue of fully paid-up shares. As General reserve is created by transfer of one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be subsequently reclassified to statement of profit and loss.
* At fair value through profit and loss
** The debentures are repayable after 3 years from the date of allotment being September 4, 2015. The debentures carry interest rate of MIBOR plus 80 basis points. The proceeds have been utilized towards working capital and other corporate purposes including refinancing of Companyâs debt. The debentures have been fully repaid in the current year.
i) Warranties: The Company provides warranties for its products, systems and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at December 31, 2018 represents the amount of the expected cost based on technical evaluation and past experience of meeting such obligations. It is expected that this expenditure will be incurred over the contractual warranty period.
ii) Loss orders: A provision for expected loss on construction contracts is recognised when it is probable that the contract costs will exceed total contract revenue. For all other contracts loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.
iii) Provision for litigation represents claims against the Company not acknowledged as debts that are expected to materialise in respect of matters in litigation. The outflow would depend on the cessation of the respective events.
iv) Provision for sales tax represents mainly the differential sales tax liability on account of non - collection of declaration forms. The outflow would depend on the cessation of the respective events.
2 Discontinued operations Disposal of Power Grids business
On 17th December 2018, ABB Limited, Zurich announced the sale of its Global Power Grids Business to Hitachi. Further to the global announcement, in the Board meeting held on 13th February, 2019 the Board granted in principle approval for the segregation of the Companyâs Power Gridâs business from the other business of the Company. Consequently, in pursuant to the requirements of Ind AS 105 - Non Current Assets Held for Sale and Discontinued Operations, the Company has classified the assets and liabilities as at 31st December 2018 pertaining to the Power Grids Business as Assets / Liabilities held for sale and measured the same at lower of cost and fair value (fair value less costs to sell). The results of Power Grid business are presented in results from discontinued operations in the current and prior periods presented.
3 Gratuity and other post-employment benefit plans
The Company has defined benefit gratuity plan and provident fund plan managed by trusts.
Gratuity Plan :
Gratuity is payable to all eligible employees of the Company as per the provisions of the Payment of Gratuity Act, 1972 or as per the Companyâs scheme, whichever is higher.
Provident Fund Plan :
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Provident Fund and Miscellaneous Provisions Act, 1952. The Contribution by employee and employer together with interest are payable at the time of separation from service or retirement whichever is earlier.
Assumptions relating to future salary increases, attrition, interest rate for discount and overall expected rate of return on assets have been considered based on relevant economic factors such as inflation, market growth and other factors applicable to the period over which the obligation is expected to be settled.
The sensitivity results above determine their individual impact on the planâs end of year defined benefit obligation. In reality, the plan is subject to multiple external experience items which may move the defined benefit obligation in similar or opposite direction, while the planâs sensitivity to such changes can vary over time.
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach.
vi The company contributed Rs.16.94 Crores towards employerâs contribution for provident fund during the year December 2018.
vii The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
4 Fair value hierarchy
The Companyâs assets and liabilities which are measured at amortised cost for which fair value are disclosed at December 31, 2018.
Valuation techniques and significant unobservable inputs
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (a) recognised and measured at fair value and (b) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
There were no transfers between Level 1, Level 2 and Level 3 during the year
The carrying value of trade receivables, loans, trade payables, other financial assets and liabilities and cash and cash equivalents are considered to be the same as there fair value, due to there short term in nature.
The fair value of financial assets and liabilities is included at the amount at which the instruments could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
The Company enters into derivative financial instruments with banks/ financial institutions. Foreign currency forward contracts are valued using valuation techniques which employs the use of market observable inputs using present value calculations. The model incorporates various inputs including the deal specific fundamental, market conditions, maturity period, transaction size, comparable trades, foreign currency spot and forward rates.
5 Financial risk management objectives and policies
The Companyâs principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to support its operations. The Companyâs principal financial assets include investments, trade and other receivables, and cash and cash equivalents that derive directly from its operations.
The Company is exposed to market risk, liquidity risk and credit risk. The Companyâs senior management oversees the management of these risks. The Companyâs senior management is supported by a Risk management committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The Risk management committee provides assurance to the Companyâs senior management that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Companyâs policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
i. Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, trade payables, deposits and investments.
a) Commodity contracts
The Company uses commodity future contracts to hedge risk against fluctuation in commodity prices. The following are outstanding future contracts entered into by the Company as on December 31, 2018.
ii. Foreign Currency Risk
The Company operates internationally and is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US$. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not Companyâs functional currency (INR).
# Includes discontinued operations related.
The above sensitivity analysis is based on a reasonably possible change in the underlying foreign currency against the Indian rupee computed from historical data and is representative of the foreign exchange currency risk inherent in financial assets and financial liabilities reported at the reporting date.
iii. Interest rate risk
The Companyâs exposure to changes in interest rates relates primarily to the Companyâs outstanding Non-convertible debentures (linked to MIBOR) in the previous year. As at December 31, 2018, the non-convertible debentures have been fully redeemed.
The exposure of the Companyâs borrowing to interest rate changes at the end of the reporting period are as follows:
iv Credit risk
Credit risk arises from cash held with banks and financial institutions, as well as credit exposure to clients, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.
Trade receivables
Trade receivables consists of a large number of customers spread across diverse industries.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivable. Under the simplified approach, the Company does not track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivable and is adjusted for forward looking estimates. At year end, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
Individual receivables which are known to be uncollectible are written off by reducing the carrying amount of trade receivable and the amount of the loss is recognised in the statement of profit and loss within other expenses.
Specific allowance for loss is also been provided by the management based on expected recovery on individual customers.
The provision provided in books for trade receivables overdue:
Management does not expect any significant loss from non-performance by counterparties on credit granted during the financial year that has not been provided for.
v. Liquidity risk
The Companyâs objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and debentures. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company maintains flexibility in funding by maintaining availability under committed credit lines.
6 Capital management
For the purpose of the Companyâs capital management, capital includes issued equity capital, securities premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Companyâs capital management is to maximise the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.
In order to achieve this overall objective, the Companyâs capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. No changes were made in the objectives, policies or processes for managing capital during the year ended December 31, 2018.
7 Share based payments
The employees of the Company are entitled to the shares of ABB Limited, Zurich (Ultimate holding company) under an equity settled share based plan. The share based payments expense accounted during the year is not material and hence the required disclosures has not been provided.
The Company does not have any contingent assets at the balance sheet date.
The Company is contesting the demands and the management believes that its position will likely be upheld in the various appellate authorities/courts. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Companyâs financial position.
In respect of the above contingent liabilities, the future cash outflows are determinable only on receipt of judgement pending at various forums / authorities.
(b) Non-cancellable operating leases
The Company has taken several premises and vehicles under cancellable and non-cancellable operating leases. These lease agreements are normally for one to ten years and have option of renewal on expiry of lease period based on mutual agreement.
Rental expenses towards cancellable and non-cancellable operating lease charged to the statement of profit and loss amounts to Rs.43.11 crores (December 31, 2017 Rs.38.30 crores)
Some of the lease agreements have escalation clause ranging from 5% to 15%. There are no exceptional/restrictive covenants in the lease agreement. There are no assets given on operating lease.
8 (a) Segment information
The Chief Operating Decision Maker (CODM) evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by operating segments. For management purposes, CODM organises the company into business units based on its products and services and has four reportable segments, as follows
i) Composition of business segments
The Companyâs business segments are organized around products and system solutions provided to its customers, which include utilities, industries, channel partners and original equipment manufacturers.
Robotics and Motion segment (RM) provides products, solutions and related services that increase industrial productivity and energy efficiency. Its motors, generators, drives and robotics provide power, motion and control for a wide range of automation applications.
Electrification Products segment (EP) provides technology across the full electrical value chain from substation to the point of consumption, enabling safer and more reliable power. A range of digital and connected innovations for low- and medium-voltage, including EV infrastructure, solar inverters, modular substations, distribution automation, power protection, wiring accessories, switchgear, enclosures, cabling, sensing and control.
Industrial Automation segment (IA) provides products, systems and services designed to optimize the productivity of industrial processes. Solutions include turnkey engineering, control systems, measurement products, life cycle services, outsourced maintenance and industry specific products. The industries served include oil and gas, power, chemicals and pharmaceuticals, pulp and paper, metals and minerals, marine and turbocharging.
Power Grids segment (PG) offers power and automation products, systems, service and software solutions across the generation, transmission and distribution value chain. Its portfolio includes grid integration, transmission, distribution and automation solutions and a complete range of high voltage products and transformers.
ii) The accounting policies used in the preparation of the financial statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those, which are directly attributable to the segment or are allocated on an appropriate basis. Corporate and other revenues, expenses, assets and liabilities to the extent not allocable to segments are disclosed in the reconciliation of reportable segments with the financial statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimization objective for the Company.
v) Power Grids segment (PG) is considered as discontinued operation and held for sale. Information about the discontinued operation is provided in Note. 32.
xiii) Pursuant to discontinuance of EPC business pertaining to turn-key substations, the Company has sold the following to ABB Substations Contracting India Private Limited
(a) Current assets and liabilities (net) having carrying amount of Rs.19.50 Crores for a consideration of Rs.19.50 Crores
(b) Revenue contracts for a consideration of Rs.10.50 Crores
c) Amount due to / from related parties
Balances in excess of 10% with a fellow subsidiary has been individually disclosed below.
All other cases have been grouped and disclosed as, other fellow subsidiaries.
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in armâs length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.
9. The Company is liable to Goods and Service Tax (âGSTâ) with effect from 1st July 2017. The revenues for the period 1st July 2017 to 31st December 2017 and revenues for the year ended 31st December 2018 is exclusive of excise duty. However, revenues for the period 1st January 2017 to 30th June 2017 are inclusive of excise duty.
Dec 31, 2016
d) There is no movement in the share capital during the current and previous year.
The debentures are repayable after 3 years from the date of allotment being September 4, 2015. The debentures carry interest rate of MIBOR plus 80 basis points. The proceeds have been utilized towards working capital and other corporate purposes including refinancing of Company''s debt.
The Company is contesting the demands and the management believes that its position will likely be upheld in the various appellate authorities/courts. The management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company''s financial position.
In respect of the above contingent liabilities, the future cash outflows are determinable only on receipt of judgement pending at various forums / authorities.
1. The Company has taken several premises and vehicles under cancellable and non-cancellable operating leases. These lease agreements are normally for one to ten years and have option of renewal on expiry of lease period based on mutual agreement. Rental expenses towards cancellable and non-cancellable operating lease charged to the statement of profit and loss amounts to Rs, 42.30 crores (Previous Year Rs, 52.93 crores).
Some of the lease agreements have escalation clause ranging from 5% to 15%. There are no exceptional / restrictive covenants in the lease agreement. There are no assets given on operating lease.
2. Excise duty on sales amounting to Rs, 541.31 crores (Previous year Rs, 530.43 crores) has been reduced from sales in the statement of profit and loss. Excise duty reversal on decrease in inventory of finished goods amounting to Rs, 1.15 crores (Previous year Rs, 0.90 crores) has been accounted in the statement of profit and loss under the head (Increase)/ decrease in inventories of finished goods, work-in-progress and traded goods.
3. Short term borrowings represent unsecured overdraft facility from banks. The same is repayable on demand and carries interest @ 9% to 11% p.a.
4. Related party disclosures a) List of related parties
Party where control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asea Brown Boveri Limited, Zurich, Switzerland (Holding Company)
Other Related parties with whom transactions have taken place during the year:
Fellow subsidiaries: ABB Inc., Cary, NC, United States
ABB (Asea Brown Boveri), S.A., Oeiras, Portugal ABB Management Services Ltd., Zurich, Switzerland
ABB (China) Ltd., Beijing, China ABB Inc., Saint-Laurent, Quebec, Canada
ABB (Hong Kong) Ltd., Hong Kong, Hong Kong ABB Industries (L.L.C.), Dubai, United Arab Emirates
ABB (Namibia) (Pty) Ltd., Windhoek, Namibia ABB Industries FZ, Dubai, United Arab Emirates
ABB (Private) Ltd., Harare, Zimbabwe ABB Information Systems Ltd., Zurich, Switzerland
ABB (Pty) Ltd., Gaborone, Botswana ABB International Marketing Ltd in liquidation, Zurich, Switzerland
ABB (Pvt) Ltd., Lahore, Pakistan ABB Intra AG, Baden, Switzerland
ABB A/S, Skovlunde, Denmark ABB Inzeniring d.o.o., Ljubljana, Slovenia
ABB AB, Vasteras, Sweden ABB Jiangjin Turbo Systems Company Limited, Chongqing, China
ABB AG, Mannheim, Germany ABB Jiangsu Jingke Instrument Transformer Co., Ltd., Suqian,
ABB AG, Vienna, Austria Jiangsu, China
ABB AS, Billingstad, Norway ABB K.K., Tokyo, Japan
ABB AS, Juri, Estonia ABB Limited, Auckland, New Zealand
ABB Manufacturing Sdn. Bhd., Subang Jaya, Malaysia ABB Limited, Bangkok, Thailand
ABB Australia Pty Limited, Moorebank, NSW, Australia ABB Limited, Dar Es Salaam, Tanzania, United Republic of
ABB Automation Co. Ltd., Riyadh, Saudi Arabia ABB Limited, Dhaka, Bangladesh
ABB Automation GmbH, Mannheim, Germany ABB Limited, Dublin, Ireland
ABB Automation L.L.C., Abu Dhabi, United Arab Emirates ABB Limited, Nairobi, Kenya
ABB Automation Products GmbH, Ladenburg, Germany ABB Limited, Warrington, United Kingdom
ABB B.V., Rotterdam, Netherlands ABB Limited/Jordan LLC., Amman, Jordan
ABB Bailey Beijing Engineering Co. Ltd., Beijing, China ABB LLC, Doha, Qatar
ABB Bailey Japan Limited, Shizuoka-Ken, Japan ABB LLC, Muscat, Oman
ABB Beijing Drive Systems Co. Ltd., Beijing, China ABB LLP., Almaty, Kazakhstan
ABB Beteiligungs-Management GmbH, Mannheim, Germany ABB Logistics Center Europe GmbH, Menden, Germany
ABB Bulgaria EOOD, Sofia, Bulgaria ABB Ltd., Hanoi, Vietnam
ABB Business Services Sp. z o.o., Warsaw, Poland ABB Ltd., Kampala, Uganda
ABB Canada Holding Limited Partnership, Saint-Laurent, Canada ABB Ltd., Kiev, Ukraine
ABB Capital B.V., Rotterdam, Netherlands ABB Ltd., Lusaka, Zambia
ABB Chongqing Transformer Company Ltd., Chongqing, China ABB Ltd., Moscow, Russian Federation
ABB Contracting Company Ltd., Riyadh, Saudi Arabia ABB Ltd., Seoul, Korea, Republic of
ABB d.o.o., Belgrade, Serbia ABB Ltd., Taipei, Taiwan, Province of China
ABB Ecuador S.A., Quito, Ecuador ABB Ltd., Zagreb, Croatia
ABB Electrical Industries Ltd., Riyadh, Saudi Arabia ABB Ltda., Bogota, Colombia
ABB Electrical Machines Ltd., Shanghai, China ABB Ltda., Sao Paulo, Brazil
ABB Elektrik Sanayi A.S., Istanbul, Turkey ABB LV Installation Materials Co. Ltd. Beijing, Beijing, China
ABB Engg. Technologies Co. (KSCC), Safat, Kuwait ABB Malaysia Sdn Bhd., Subang Jaya, Malaysia
ABB Engineering (Shanghai) Ltd., Shanghai, China ABB Mexico S.A. de C.V., San Luis Potosi SLP, Mexico
ABB Engineering Trading and Service Ltd., Budapest, Hungary ABB Motion Limited, Bristol, United Kingdom
ABB Enterprise Software Inc., Atlanta, GA, United States ABB N.V., Zaventem, Belgium
ABB Enterprise Software UK Limited, Warrington, United Kingdom ABB Near East Trading Ltd., Amman, Jordan
ABB ESAP Limited, St. Peter''s Port, Guernsey ABB Norden Holding AB, Vasteras, Sweden
ABB Finance B.V., Rotterdam, Netherlands ABB Oryx Motors and Generators Service LLC, Doha, Qatar
ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo, Egypt ABB Oy, Helsinki, Finland
ABB France, Cergy Pontoise, France ABB Power & Automation (Private) Limited, Lahore, Pakistan
ABB FZ-LLC, Dubai, United Arab Emirates ABB Power Equipment (Xiamen) Co., Ltd., Xiamen, China
ABB Generators Ltd., Nanchang, China ABB Power Protection SA, Gambarogno, Switzerland
ABB Genway Xiamen Electrical Equipment Co. Ltd., Xiamen, China ABB Pte. Ltd., Singapore, Singapore
ABB Global Industries and Services Private Limited, Bengaluru, India ABB Research Ltd., Zurich, Switzerland
ABB Global Marketing FZ LLC, Dubai, United Arab Emirates ABB S.A., Buenos Aires, Argentina
ABB Hefei T ransformer Co. Ltd., Hefei, China ABB S.A., Casablanca, Morocco
ABB High Voltage Switchgear (Xiamen) Company Ltd., Xiamen, China ABB S.A., Lima, Peru
ABB High Voltage Switchgear Co., Ltd. Beijing, Beijing, China ABB S.A., Panama, Panama
ABB Holdings B.V., Rotterdam, Netherlands ABB S.A., Santiago, Chile
ABB Holdings Sdn. Bhd., Subang Jaya, Malaysia ABB S.p.A., Milan, Italy
ABB Import & Export Services Ltd., Oranjestad/Aruba (NA), Aruba ABB s.r.o., Prague, Czech Republic
ABB SARL, Kinshasa Gombe, Congo, Democratic Republic of the ABB, s.r.o., Bratislava, Slovakia
ABB SAS, Cergy Pontoise, France ABB NG Limited, Lagos, Nigeria
ABB Schweiz AG, Baden, Switzerland Asea Brown Boveri Electrica SGPS (Angola) Limitada, Luanda, Angola
ABB Secheron S.A., Satigny, Switzerland Asea Brown Boveri Industrial, Technical & Commercial Company of
ABB Service Co. Ltd., Al Khobar, Saudi Arabia Imports - Exports S.A., Metamorphossis Attica , Greece
ABB Shanghai Motors Co. Ltd., Shanghai, China Asea Brown Boveri Lanka (Private) Limited, Colombo, Sri Lanka
ABB Shanghai Transformer Co. Ltd., Shanghai, China Asea Brown Boveri Ltd., Moka, Mauritius
ABB Shenzhen New Energy System Co., Ltd , Shenzhen, China Asea Brown Boveri Ltda., La Paz, Bolivia, Plurinational State of
ABB SIA, Riga, Latvia Asea Brown Boveri S.A., Caracas, Venezuela, Bolivarian Republic of
ABB South Africa (Pty) Ltd., Longmeadow, South Africa Asea Brown Boveri S.A., Douala, Cameroon
ABB Sp. z o.o., Warsaw, Poland Asea Brown Boveri S.A., Madrid, Spain
ABB Stotz-Kontakt GmbH, Heidelberg, Germany Asea Brown Boveri S.A.E., Cairo, Egypt
ABB Striebel & John GmbH, Sasbach, Germany Baldor Electric (Asia) PTE Ltd., Singapore, Singapore
ABB Technologies Ltd., Haifa, Israel Baldor Electric Company, Fort Smith, AR, United States
ABB Technologies S.A., Dakar, Senegal Busch-Jaeger Elektro GmbH, Ludenscheid, Germany
ABB Technologies W.L.L., Bahrain, Bahrain Electrical Materials Center Co. Ltd, Riyadh, Saudi Arabia
ABB Technology Oy, Helsinki, Finland Maska Power T ransmission (Changzhou) Co.Ltd., Changzhou, China
ABB Technology SA, Abidjan, Cote d''Ivoire Power-One Italy S.p.A., Terranuova Bracciolini (AR), Italy
ABB Training Center GmbH & Co. KG, Heidelberg, Germany Power-One Renewable Energy Solutions India Private Limited,
ABB T ransformers S.A.E., El-Nozha El-Gedida, Egypt Mumbai, India
ABB Transmission & Distribution Limited LLC, Abu Dhabi, United Power-One Renewable Energy Solutions LLC, Delaware, United States
Arab Emirates PT ABB Sakti Industri, Jakarta, Indonesia
ABB Turbo Systems (Hong Kong) Limited, Hong Kong, Hong Kong Pucaro Elektro-Isolierstoffe GmbH, Roigheim, Germany
ABB Turbo Systems AG, Baden, Switzerland Shanghai ABB Power Transmission Company Ltd., Shanghai, China
ABB Turbo Systems Holding Ltd., Baden, Switzerland Shantou Winride Switchgear Co., Ltd., Longhu District Shantou,
ABB Turbochargers S.A.E., Suez, Egypt China
ABB UAB, Avizieniai , Lithuania Spirit IT B.V., Eindhoven, Netherlands
ABB Verwaltungs AG, Zurich, Switzerland Sucursal Panama de ABB SA, Panama, Panama
ABB Xiamen Electrical Controlgear Co. Ltd., Xiamen, China Thomas & Betts Asia (Singapore) Pte. Ltd., Singapore, Singapore
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen, China Thomas & Betts Corporation, Knoxville, TN, United States
ABB Xiamen Switchgear Co. Ltd., Xiamen, China Thomas & Betts India Private Ltd., Hyderabad, India
ABB Xi''an High Power Rectifier Company Limited, Xi''an, China Thomas & Betts Limited, Saint-Jean-sur-Richelieu, Quebec, Canada
ABB Xi''an Power Capacitor Company Limited, Xi''an, China Thomas & Betts Power Solutions LLC, Delaware, United States
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui , China T rasfor SA, Monteggio, Switzerland
ABB Zhongshan T ransformer Company Ltd., Zhongshan, China Turbo Systems United Co. Ltd., Tokyo, Japan
ABB, Inc., Paranaque, Metro Manila, Philippines
Key Managerial Personnel :
Managing Director: Mr. Sanjeev Sharma
Company Secretary: Mr. B. Gururaj
Chief Financial Officer: Mr. T.K. Sridhar
b) Nature of provisions:
i) Warranties: The Company provides warranties for its products, systems and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at December 31, 2016 represents the amount of the expected cost based on technical evaluation and past experience of meeting such obligations. It is expected that this expenditure will be incurred over the contractual warranty period.
ii) Loss orders: A provision for expected loss on construction contracts is recognised when it is probable that the contract costs will exceed total contract revenue. For all other contracts loss order provisions are made when the unavoidable costs of meeting the obligation under the contract exceed the currently estimated economic benefits.
iii) Provision for litigation represents claims against the Company not acknowledged as debts that are expected to materialise in respect of matters in litigation. The outflow would depend on the cessation of the respective events.
iv) Provision for sales tax represents mainly the differential sales tax liability on account of non - collection of declaration forms. The outflow would depend on the cessation of the respective events.
5. The employees of the Company are entitled to purchase shares of ABB Limited., Zurich (the ultimate holding company) on the settlement date, at a price fixed based on the fair market price on the grant date under ABB employee share acquisition plan. During the year, the Company has been cross charged Rs, 0.38 crores (Previous Year Rs, Nil crores) towards the above including administrative charges and this has been charged in the statement of profit and loss under the head salaries, wages and bonus.
The Institute of Chartered Accountants of India has issued a guidance note on accounting for ''employee share-based payments'', which is applicable to employee share based payment plans. The scheme detailed above is managed and administered, compensation benefits in respect of the scheme is assessed and accounted by the ultimate holding company, except for the obligation towards expenses cross charged as above. Accordingly, the Company is of the opinion that there is no further accounting treatment/ disclosure required under the said guidance note.
6. Derivative Instruments
i) Forward cover for foreign currency trade receivables outstanding as of balance sheet date is Rs, 328.10 crores (Previous Year Rs, 271.45 crores).
ii) Forward cover for expected future sales or highly probable forecast transaction as of balance sheet date is Rs, 136.88 crores (Previous Year Rs, 433.12 crores).
iii) Forward cover for foreign currency trade payables outstanding as of balance sheet date is Rs, 732.80 crores (Previous Year Rs, 716.56 crores).
iv) Forward cover for expected future purchases or highly probable forecast transaction as of balance sheet date is Rs, 176.42 crores (Previous Year Rs, 440.94 crores).
v) Foreign currency exposure (net) that are not hedged by derivative instruments or otherwise is payable Rs, 354.69 crores (Previous year payable was Rs, 187.33 crores).
7. Commodity Contracts
The Company uses commodity future contracts to hedge risk against fluctuation in commodity prices. The following are outstanding future contracts entered into by the Company as on December 31, 2016
Notes: a) Gratuity Plan
Gratuity is payable to all eligible employees of the Company as per the provisions of the Payment of Gratuity Act, 1972 or as per the Company''s scheme, whichever is higher.
b) Provident Fund Plan
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Provident Fund and Miscellaneous Provisions Act, 1952. The Contribution by employee and employer together with interest are payable at the time of separation from service or retirement whichever is earlier.
c) Assumptions relating to future salary increases, attrition, interest rate for discount and overall expected rate of return on assets have been considered based on relevant economic factors such as inflation, market growth and other factors applicable to the period over which the obligation is expected to be settled.
d) The Company expects to contribute Rs, 15.00 crores (Previous Year Rs, 13.00 crores) to gratuity fund and Rs, 2.00 crores (Previous Year Rs, 18.00 crores) to provident fund in 2017.
e) The attrition rate for gratuity varies from 1% to 8% for various age groups.
8. In accordance with the provisions of Companies Act, 2013, the Company is required to contribute Rs, 7.49 crores (Previous Year Rs, 5.56 crores) towards CSR expenditure for the year ended December 31, 2016 against which actual capital expenditure is Rs, 4.96 crores (Previous Year Rs, 1.24 crores) and revenue expenditure is Rs, 2.45 crores (Previous Year Rs, 0.46 crores).
9. The previous year figures have been regrouped/ reclassified, where necessary, to conform with the current year''s classifications.
Dec 31, 2015
A) Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs, 2/- per share. Each holder of equity shares is entitled to one vote
per share. The Company declares and pays dividends in Indian Rupees.
The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
During the year ended December 31, 2015, the amount of per share
dividend recommended and provided for distributions to equity
shareholders is Rs, 3.70/-. (December 31, 2014 : Rs, 3.70/-)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
As per records of the Company and other declarations received from
shareholders, the above shareholding represents both legal and
beneficial ownerships of shares.
b) There is no movement in the share capital during the current and
previous year.
1. Segment reporting
A) Primary segment reporting (by business segments)
i) Composition of business segments
The Company's business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays, insulation paper and paper board components etc.
Process Automation segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimization objective for the Company.
v) Figures in brackets are in respect of the previous year.
2. The Company has taken several premises and vehicles under
cancelable and non-cancelable operating leases. These lease agreements
are normally for one to ten years and have option of renewal on expiry
of lease period based on mutual agreement. Rental expenses towards
cancelable and non-cancelable operating lease charged to the statement
of profit and loss amounts to Rs, 52.93 crores (Previous Year Rs, 44.80
crores).
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreement. There are no assets given on operating lease.
3. Excise duty on sales amounting to Rs, 530.43 crores (Previous year
Rs, 423.64 crores) has been reduced from sales in the statement of
profit and loss. Excise duty reversal on decrease in inventory of
finished goods amounting to Rs, 0.90 crores (December 31, 2014: Rs,
3.10 crores) has been accounted in the statement of profit and loss
under the head "(Increase) / decrease in inventories of finished goods,
work-in-progress and traded goods".
4. Long term borrowings represent 600, unsecured, rated, listed,
redeemable, non-convertible debentures of face value of Rs, 1.0 crore
each aggregating to Rs, 600.00 crores on private placement basis. The
debentures are repayable after 3 years from the date of allotment being
September 4, 2015. The debentures carry interest rate of MIBOR plus 80
basis points. The proceeds have been utilized towards working capital
and other corporate purposes including refinancing the Company's debt.
5. Short term borrowings represent unsecured short term loan and
overdraft facility from banks. The same is repayable on demand and
carries interest @ 9% to 11% p.a.
The Company is contesting the demands and the management believes that
its position will likely be upheld in the various appellate authorities
/ courts. The management believes that the ultimate outcome of this
proceeding will not have a material adverse effect on the Company's
financial position.
In respect of the above contingent liabilities, the future cash
outflows are determinable only on receipt of judgment pending at
various forums / authorities.
6. Related party disclosures
a) List of related parties
Party where control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asea Brown Boveri Limited, Zurich, Switzerland (Holding Company)
Other Related parties with whom transactions have taken place during
the year:
Fellow subsidiaries:
ABB (Asea Brown Boveri), S.A.,Paco de Arcos, Portugal ABB Inc.,
Saint-Laurent Quebec, Canada.
ABB (China) Ltd.,Beijing,China ABB Inc.,Cary, NC,United States
ABB (Hong Kong) Ltd.,Hong Kong, Hong Kong ABB Industries
(L.L.C.).,Dubai,United Arab Emirates
ABB (Private) Ltd. ,Harare ,Zimbabwe., ABB Industries FZ.,Dubai,United
Arab Emirates
ABB (Pty) Ltd.,Gaborone,Botswana ABB Information Systems
Ltd.,Zurich,Switzerland
ABB (Pvt) Ltd.,Lahore,Pakistan ABB International Marketing Ltd.,
Zurich, Switzerland
ABB A/S.,Skovlunde,Denmark ABB Intra AG, Zurich, Switzerland
ABB AB.,Västerås,Sweden ABB Investments (Pty) Ltd,Modderfontein,South
Africa
ABB AG.,Mannheim,Germany ABB Jiangjin Turbo Systems Company
Limited.,Chongqing,China
ABB AG.,Vienna,Austria ABB Jiangsu Jingke Instrument Transformer Co.,
Ltd.,Suqian, Jiangsu,China
ABB AS.,Billingstad,Norway ABB K.K.,Tokyo,Japan
ABB AS.,Jüri,Estonia ABB Limited.,Auckland,New Zealand
ABB Australia Pty Limited.,Sydney,Australia ABB
Limited.,Bangkok,Thailand
ABB Automation Co. Ltd.,Riyadh,Saudi Arabia ABB Limited.,Dar Es
Salaam,United Republic of Tanzania
ABB Automation GmbH, Mannheim, Germany. ABB Limited.,Dhaka,Bangladesh
ABB Automation L.L.C.,Abu Dhabi,United Arab Emirates ABB
Limited.,Nairobi,Kenya
ABB Automation Products GmbH.,Ladenburg,Germany ABB
Limited.,Warrington,United Kingdom
ABB Bailey Beijing Engineering Co. Ltd.,Beijing,China ABB
Limited/Jordan LLC.,Amman,Jordan
ABB Bailey Japan Limited.,Shizuoka-Ken,Japan ABB LLC.,Muscat,Oman
ABB Beijing Drive Systems Co. Ltd.,Beijing,China ABB
LLP.,Almaty,Kazakhstan
ABB Beteiligungs-Management GmbH, Germany ABB Logistics Center Europe
GmbH.,Menden,Germany
ABB Bulgaria EOOD.,Sofa,Bulgaria ABB Ltd. ,Hanoi ,Vietnam.
ABB B V, Rotterdam, Netherlands ABB Ltd., Zagreb, Croatia.
ABB Capital, B.V.,Amsterdam,Netherlands ABB Ltd.,Dublin,Ireland
ABB Chongqing Transformer Company Ltd.,Chongqing,China ABB
Ltd.,Kampala,Uganda
ABB CL Logistic S.A., Montevideo, Uruguay ABB Ltd.,Kyiv,Ukraine
ABB Contracting Company Ltd.,Riyadh,Saudi Arabia ABB Ltd.,Lusaka,Zambia
ABB D.o.o., Ljubljana, Slovenia ABB Ltd.,Lusaka,Zambia
ABB d.o.o.,Belgrade,Serbia ABB Ltd.,Moscow,Russian Federation
ABB Ecuador S.A.,Quito,Ecuador ABB Ltd.,Seoul,Korea, Republic of
ABB Electrical Industries Ltd.,Riyadh,Saudi Arabia ABB
Ltd.,Taipei,Taiwan, Province of China
ABB Electrical Machines Ltd.,Shanghai,China ABB Ltd.,Zagreb,Croatia
ABB Elektrik Sanayi A.S.,Istanbul,Turkey ABB Ltda.,Osasco,Brazil
ABB Engg. Technologies Co. (KSCC).,Safat,Kuwait ABB LV Installation
Materials Co. Ltd.,Beijing,China
ABB Engineering (Shanghai) Ltd.,Shanghai,China ABB Malaysia Sdn
Bhd.,Subang Jaya,Malaysia
ABB Engineering Trading and Service Ltd.,Budapest,Hungary ABB
Management Services Ltd.,Zurich,Switzerland
ABB Equity Limited.,St. Peter's Port,Guernsey ABB Manufacturing Sdn.
Bhd.,Subang Jaya,Malaysia
ABB ESAP Limited.,St. Peter's Port,Guernsey ABB Mexico S.A. de C.V.,San
Luis Potosi SLP,Mexico
ABB Finance B.V.,Amsterdam,Netherlands ABB N.V.,Zaventem,Belgium
ABB for Electrical Industries (ABB ARAB) S.A.E.,Cairo,Egypt ABB Near
East Trading Ltd.,Amman,Jordan
ABB France.,Les Ulis,France ABB Norden Holding AB, Västerås, Sweden
ABB FZ-LLC.,Dubai,United Arab Emirates ABB Oryx Motors and Generator
Service LLC, Doha, Qatar
ABB Generators Ltd, Nanchang, China. ABB Oy.,Helsinki,Finland
ABB Genway Xiamen Electrical Equipment Co. Ltd.,Xiamen,China ABB Power
Equipment (Xiamen) Co., Ltd.,Xiamen,China
ABB Global Industries and Services Private Limited.,Bengaluru,India ABB
Pte. Ltd.,Singapore,Singapore
ABB Global Marketing FZ LLC.,Dubai,United Arab Emirates ABB Qatar LLC.,
Doha, Qatar
ABB Group Accounting Services B.V.,Rotterdam,Netherlands ABB Research
Ltd.,Zurich,Switzerland
ABB Hefei Transformer Co. Ltd.,Hefei,China ABB S.A., Les Ulis, France
ABB High Voltage Switchgear (Xiamen) Company Ltd.,Xiamen,China ABB
S.A.,Buenos Aires,Argentina
ABB High Voltage Switchgear Co. Ltd.,Beijing,China ABB
S.A.,Casablanca,Morocco
ABB Holdings Sdn. Bhd.,Subang Jaya,Malaysia ABB S.A.,Lima,Peru
ABB Import & Export Services Ltd., Oranjestad/Aruba (NA), Aruba (Nl)
ABB S.A.,Panama,Panama
ABB S.A.,Santiago,Chile Asea Brown Boveri Lanka (Private) Limited
ABB S.p.A.,Milan,Italy Asea Brown Boveri Ltd.,Port Louis,Mauritius
ABB s.p.r.l.,Kinshasa Gombe,The Democratic Republic of Congo Asea Brown
Boveri Ltda.,Bogotá,Colombia
ABB s.r.o.,Prague,Czech Republic Asea Brown Boveri Ltda.,La Paz,
Plurinational State of Bolivia
ABB Schweiz AG.,Baden,Switzerland Asea Brown Boveri S.A., Caracas,
Venezuela
ABB Sécheron S.A.,Satigny,Switzerland Asea Brown Boveri
S.A.,Douala,Cameroon
ABB Service Co. Ltd.,Al Khobar,Saudi Arabia Asea Brown Boveri
S.A.,Madrid,Spain
ABB Shanghai Motors Co. Ltd.,Shanghai,China Asea Brown Boveri
S.A.,Metamorphossis Attica ,Greece
ABB Shanghai Transformer Co. Ltd.,Shanghai,China Asea Brown Boveri
S.A.E., Cairo, Egypt
ABB SIA.,Riga,Latvia Baldor Electric (Asia) PTE
Ltd.,Singapore,Singapore
ABB South Africa (Pty) Ltd.,Longmeadow,South Africa Baldor Electric
(Shanghai) Company Ltd.,Shanghai,China
ABB Sp. z o.o.,Warsaw,Poland Baldor Electric Company.,Fort Smith,
AR,United States
ABB Stotz-Kontakt GmbH.,Heidelberg,Germany Baldor UK Ltd.,Bristol,
England,United Kingdom
ABB Technologies Ltd., Tirat Carmel, Israel Busch-Jaeger Elektro
GmbH.,Mannheim/Lüdenscheid,Germany
ABB Technologies S.A., Dakar, Senegal Electrical Materials
Center.,Riyadh,Saudi Arabia
ABB Technologies W.L.L.,Bahrain,Bahrain K-Tek Level Engineering Pvt.
Ltd., Navi Mumbai, India
ABB Technology Ltd.,Zurich,Switzerland Maska Power Transmission
(Changzhou) Co.Ltd.,Changzhou,China
ABB Technology Oy, Helsinki, Finland Newave Energy
AG.,Neuenhof,Switzerland
ABB Technology SA.,Abidjan,Cote d'Ivoire Newave
SA.,Quartino,Switzerland
ABB Transformers S.A.E.,El-Nozha El-Gedida,Egypt Power-One Italy
S.p.A.,Siena,Italy
ABB Transmission & Distribution Ltd.,Abu Dhabi,United Arab Emirates
Power-One Renewable Energy (China) Co. Ltd.,Shenzhen, China.
ABB Turbo Systems (Hong Kong) Limited.,Hong Kong,Hong Kong Power-One
Renewable Energy Solutions India Private Ltd.,Mumbai,India
ABB Turbo Systems AG.,Baden,Switzerland Power-One Renewable Energy
Solutions LLC.,Delaware,United States
ABB Turbo Systems Holding Ltd, Baden,Switzerland. PT ABB Sakti
Industri.,Jakarta,Indonesia
ABB Turbochargers S.A.E.,Suez,Egypt Pucaro Elektro-Isolierstoffe
GmbH.,Roigheim,Germany
ABB UAB, Vilnius, Lithuania Shantou Winride Switchgear Co., Ltd.,Longhu
District Shantou,China
ABB Verwaltungs AG.,Zurich,Switzerland Spirit IT B.V, Eindhoven,
Netherlands.
ABB Xiamen Electrical Controlgear Co. Ltd.,Xiamen,China Striebel & John
GmbH & Co. KG.,Mannheim,Germany
ABB Xiamen Low Voltage Equipment Co. Ltd.,Xiamen,China Sucursal Panama
de ABB SA.,Panama,Panama
ABB Xiamen Switchgear Co. Ltd.,Xiamen,China Thomas & Betts Asia
(Singapore) Pte. Ltd, Singapore
ABB Xi'an High Power Rectifer Company Limited.,Xi'an,China Thomas &
Betts Corporation.,Knoxville, TN,United States
ABB Xi'an Power Capacitor Company Limited.,Xi'an,China Thomas & Betts
India Private Ltd.,Andhra Pradesh,India
ABB Xinhui Low Voltage Switchgear Co. Ltd.,Xinhui ,China Thomas & Betts
Limited ,Saint-Jean-sur-Richelieu, Quebec,Canada.,
ABB Zhongshan Transformer Company Ltd.,Zhongshan,China Thomas & Betts
Power Solutions LLC.,Delaware,United States
ABB, Inc.,Paranaque, Metro Manila,Philippines Trasfor
SA.,Monteggio,Switzerland
ABB, s.r.o.,Bratislava,Slovakia Tropos Networks, Inc.,Wilmington,
Delaware,United States
ABBNG Limited.,Lagos,Nigeria Turbo Systems United Co. Ltd.,Tokyo,Japan
Asea Brown Boveri (Pty) Ltd., Windhoek, Namibia Ventyx (UK)
Ltd.,Surrey,United Kingdom
Asea Brown Boveri Electrica SGPS (Angola) Limitada.,Luanda,Angola
Ventyx Inc.,Atlanta,United States
Key managerial personnel:
Managing director: Mr. Bazmi R. Husain (upto December 31, 2015)
Company secretary Mr. B. Gururaj
Chief fnancial offcer: Mr. T. K. Sridhar (Effective July 24, 2015)
Mr. Amlan Datta Majumdar (upto March 10, 2015)
b) Nature of provisions:
i) Warranties: The Company provides warranties for its products,
systems and services, undertaking to repair or replace the items that
fail to perform satisfactorily during the warranty period. Provision
made as at December 31, 2015 represents the amount of the expected cost
based on technical evaluation and past experience of meeting such
obligations. It is expected that this expenditure will be incurred over
the contractual warranty period.
ii) Loss orders: A provision for expected loss on construction
contracts is recognized when it is probable that the contract costs
will exceed total contract revenue. For all other contracts loss order
provisions are made when the unavoidable costs of meeting the
obligation under the contract exceed the currently estimated economic
benefits.
iii) Provision for litigation represents claims against the Company not
acknowledged as debts that are expected to materialize in respect of
matters in litigation. The outflow would depend on the cessation of the
respective events.
iv) Provision for sales tax represents mainly the differential sales
tax liability on account of non  collection of declaration forms. The
outflow would depend on the cessation of the respective events.
7. The employees of the Company are entitled to purchase shares of
ABB Limited., Zurich (the ultimate holding company) on the settlement
date, at a price fxed based on the fair market price on the grant date
under ABB employee share acquisition plan. During the year, the Company
has been cross charged Rs, Nil (Previous Year Rs,.0.08 crores) towards
the above including administrative charges and this has been charged in
the statement of proft and loss under the head salaries, wages and
bonus.
The Institute of Chartered Accountants of India has issued a guidance
note on accounting for 'employee share-based payments', which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged as above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment/ disclosure required under the said guidance note.
8. Derivative Instruments
i) Forward cover for foreign currency trade receivables outstanding as
of balance sheet date is Rs, 271.45 crores (Previous Year Rs, 349.05
crores).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs, 433.12 crores (Previous
Year Rs, 384.91 crores).
iii) Forward cover for foreign currency trade payables outstanding as
of balance sheet date is Rs, 716.56 crores (Previous Year Rs, 577.89
crores).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs, 440.94 crores
(Previous Year Rs, 116.55 crores).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is payable Rs, 187.33 crores (Previous year
payable was Rs, 267.31 crores).
9. Commodity Contracts
The Company uses commodity future contracts to hedge risk against
fuctuation in commodity prices. The following are outstanding future
contracts entered into by the Company as on December 31, 2015.
Notes:
a) Gratuity Plan
Gratuity is payable to all eligible employees of the Company as per the
provisions of the Payment of Gratuity Act, 1972 or as per the Company's
scheme, whichever is higher.
b) Provident Fund Plan
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The Contribution by employee and
employer together with interest are payable at the time of separation
from service or retirement whichever is earlier.
c) Assumptions relating to future salary increases, attrition, interest
rate for discount and overall expected rate of return on assets have
been considered based on relevant economic factors such as inflation,
market growth and other factors applicable to the period over which the
obligation is expected to be settled.
d) The Company expects to contribute Rs, 13.00 crores (Previous Year
Rs, 20.00 crores) to gratuity fund and Rs, 18.00 crores (Previous Year
Rs, 20.00 crores) to provident fund in 2016.
e) The attrition rate for gratuity varies from 1% to 8% for various age
groups.
10. In accordance with the provisions of Companies Act, 2013, the
Company is required to contribute Rs, 5.60 crores towards CSR
expenditure for the year against which actual capital expenditure is
Rs, 1.24 crores and revenue expenditure is Rs, 0.46 crores. The said
provision is frst time applicable for the company from January 1, 2015.
11. The previous year figures have been regrouped/ reclassified, where
necessary, to conform with the current year's classifications.
Dec 31, 2014
1. Corporate information
ABB India Limited (''the Company'') has served utility and industry
customers for over six decades with the complete range of engineering,
products, solutions and services in areas of Automation and Power
technology. The Company has extensive installed base for manufacturing
and a countrywide marketing and service presence. Besides catering to
Indian domestic market, the Company is also playing an increasing role
in the global market.
a) Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of ''
2/- per share. Each holder of equity shares is entitled to one vote per
share. The Company declares and pay dividends in Indian Rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended December 31,2014, the amount of per share
dividend recommended and provided for distribution to equity
shareholders is Rs. 3.70 (December 31,2013: Rs. 3.00)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
As per records of the Company and other declarations received from
shareholders, the above shareholding represents both legal and
beneficial ownerships of shares.
d) There is no movement in the share capital during the current and
previous year.
2. Amalgamation
a) The Hon''ble High Court of Bombay vide its Order dated September 27,
2013 had sanctioned the Scheme of Amalgamation of Baldor Electric India
Private Limited (Baldor), a wholly owned subsidiary, with ABB India
Limited (the Company). The Scheme become effective on November 1,2013
with appointed date being April 1,2012. The excess of the Company''s
cost of acquisition of equity and preference shares in the Baldor over
the par value of the equity and preference shares cancelled, was
adjusted in the books of the Company out of the amount available in the
General Reserve account as on December 31, 2011. The amount adjusted
was Rs. 33.97 crores.
b) Net profit of Rs. 2.42 crores of Baldor from the appointed date i.e,
April 1, 2012 to December 31, 2012 of the earlier financial year had
been disclosed separately in the previous year statement of profit and
loss.
3. Segment reporting
A) Primary segment reporting (by business segments)
i) Composition of business segments
The Company''s business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays, insulation paper and paper board components etc.
Process Automation segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimization objective for the Company.
v) Figures in brackets are in respect of the previous year.
(Rs. in Crores)
As at December 31, 2014 2013
29. Contingent liabilities
i) Excise duty / service tax and sales tax
liabilities in dispute 674.12 384.83
ii) Custom duty liabilities in dispute 2.07 16.14
iii) Claims against the Company not
acknowledged as debts 8.85 8.85
iv) Income tax matters in dispute 44.27 210.70
The Company is contesting the demands and the management believes that
its position will likely be upheld in the various appellate authorities
/ courts. The management believes that the ultimate outcome of this
proceeding will not have a material adverse effect on the Company''s
financial position.
4. The Company has taken several premises and vehicles under
cancelable and non-cancelable operating leases. These lease agreements
are normally for one to ten years and have option of renewal on expiry
of lease period based on mutual agreement. Rental expenses towards
cancelable and non- cancelable operating lease charged to the statement
of profit and loss amounts to Rs. 44.80 crores (Previous Year Rs. 37.71
crores).
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreement. There are no assets given on operating lease.
5. Excise duty on sales amounting to Rs. 423.64 crores (December
31,2013: Rs. 474.78 crores) has been reduced from sales in the statement
of profit and loss. Excise duty reversal on decrease in inventory of
finished goods amounting to Rs. 3.10 crores (December 31,2013: Rs. 2.43
crores) has been accounted in the statement of profit and loss under
the head "(Increase) / decrease in inventories of finished goods,
work-in-progress and traded goods.
6. Short term borrowings represent unsecured short term loan and
overdraft facility from banks. The same is repayable on demand and
carries interest @9% to 11% p.a.
7. Related party disclosures
a) List of related parties
Party where control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asea Brown Boveri Ltd., Zurich, Switzerland (Holding Company)
Other Related parties with whom transactions have taken place during
the year:
Fellow subsidiaries:
ABB (Asea Brown Boveri), S.A., Paco de Arcos, Portugal
ABB (China) Ltd., Beijing, China
ABB (Hong Kong) Ltd., Hong Kong, Hong Kong
ABB (Nambia) (Pty) Ltd., Windhoek, Namibia
ABB (Private) Ltd., Harare, Zimbabwe
ABB (Pty) Ltd., Gaborone, Botswana
ABB (Pvt) Ltd., Lahore, Pakistan
ABB A/S., Skovlunde, Denmark
ABB AB., Vasteras, Sweden
ABB AG., Mannheim, Germany
ABB AG., Vienna, Austria
ABB AS., Billingstad, Norway
ABB AS., Juri, Estonia
ABB Australia Pty Limited., Sydney, Australia
ABB Automation Co. Ltd., Riyadh, Saudi Arabia
ABB Automation EOOD, Rakovski, Bulgaria
ABB Automation GmbH., Mannheim, Germany
ABB Automation L.L.C., Abu Dhabi, United Arab Emirates
ABB Automation Products GmbH., Ladenburg, Germany
ABB B.V., Rotterdam, Netherlands
ABB Bailey Beijing Engineering Co. Ltd., Beijing, China
ABB Bailey Japan Limited., Shizuoka-Ken, Japan
ABB Beijing Drive Systems Co. Ltd., Beijing, China
ABB Bulgaria EOOD., Sofia, Bulgaria
ABB BV, Rotterdam, Netherlands
ABB Capital, B.V, Amsterdam, Netherlands
ABB Chongqing Transformer Company Ltd., Chongqing, China
ABB CL Logistic S.A., Montevideo, Uruguay
ABB Contracting Company Ltd., Riyadh, Saudi Arabia
ABB D.o.o., Ljubljana, Slovenia
ABB d.o.o., Belgrade, Serbia
ABB Ecuador S.A., Quito, Ecuador
ABB Electrical Industries (ABB ARAB) S.A.E., Cairo, Egypt
ABB Electrical Industries Ltd., Riyadh, Saudi Arabia
ABB Electrical Machines Ltd., Shanghai, China
ABB Elektrik Sanayi A.S., Istanbul, Turkey
ABB Engg. Technologies Co. (KSCC)., Safat, Kuwait
ABB Engineering (Shanghai) Ltd., Shanghai, China
ABB Engineering Trading and Service Ltd., Budapest, Hungary
ABB Equity Limited., St. Peter''s Port, Guernsey
ABB ESAP Limited., St. Peter''s Port, Guernsey
ABB Finance B.V, Amsterdam, Netherlands
ABB for Electrical Industries (ABB ARAB) S.A.E., Cairo, Egypt
ABB France., Les Ulis, France
ABB FZ-LLC., Dubai, United Arab Emirates
ABB Genway Xiamen Electrical Equipment Co. Ltd., Xiamen, China ABB
Global Industries and Services Limited., Bengaluru, India ABB Global
Marketing FZ LLC., Dubai, United Arab Emirates ABB Group Accounting
Services B.V., Rotterdam, Netherlands ABB Hefei Transformer Co. Ltd.,
Hefei, China
ABB High Voltage Switchgear (Xiamen) Company Ltd., Xiamen, China
ABB High Voltage Switchgear Co. Ltd., Beijing, China
ABB Holdings Sdn. Bhd., Subang Jaya, Malaysia
ABB Import & Export Services Ltd., Oranjestad/Aruba (NA), Aruba (Nl)
ABB Inc., Cary, NC, United States ABB Inc., St. Laurent, Quebec, Canada
ABB Industries (L.L.C.)., Dubai, United Arab Emirates ABB Industries
FZ., Dubai, United Arab Emirates ABB Information Systems Ltd., Zurich,
Switzerland ABB International Marketing Ltd., Zurich, Switzerland ABB
Intra AG, Zurich, Switzerland
ABB Jiangjin Turbo Systems Company Limited., Chongqing, China
ABB Jiangsu Jingke Instrument Transformer Co., Ltd., Suqian, Jiangsu,
China
ABB K.K., Tokyo, Japan
ABB Limited., Auckland, New Zealand
ABB LIMITED., Bangkok, Thailand
ABB Limited., Dar Es Salaam, United Republic of Tanzania
ABB Limited., Dhaka, Bangladesh
ABB Limited., Nairobi, Kenya
ABB Limited., Warrington, United Kingdom
ABB Limited/Jordan LLC., Amman, Jordan
ABB LLC., Doha, Qatar
ABB LLC., Muscat, Oman
ABB LLP, Almaty, Kazakhstan
ABB Logistics Center Europe GmbH., Menden, Germany
ABB Ltd., Dublin, Ireland
ABB Ltd., Hanoi, Viet Nam
ABB Ltd., Kampala, Uganda
ABB Ltd., Kyiv, Ukraine
ABB Ltd., Lusaka, Zambia
ABB Ltd., Moscow, Russian Federation
ABB Ltd., Seoul, Republic of Korea
ABB Ltd., Taipei, Taiwan, Province of China
ABB Ltd., Zagreb, Croatia
ABB Ltda., Osasco, Brazil
ABB LV Installation Materials Co. Ltd., Beijing, China ABB Malaysia Sdn
Bhd., Subang Jaya, Malaysia ABB Management Services Ltd., Zurich,
Switzerland ABB Manufacturing Sdn. Bhd., Subang Jaya, Malaysia ABB
Mexico S.A. de C.V., San Luis Potosi SLP, Mexico ABB N.V., Zaventem,
Belgium ABB Near East Trading Ltd., Amman, Jordan ABB Norden Holding
AB, Vasteras, Sweden ABB Oy., Helsinki, Finland
ABB Power Equipment (Xiamen) Co., Ltd., Xiamen, China
ABB Pte. Ltd., Singapore, Singapore
ABB Research Ltd., Zurich, Switzerland
ABB S.A., Les Ulis, France
ABB S.A., Buenos Aires, Argentina
ABB S.A., Casablanca, Morocco
ABB S.A., Lima, Peru
ABB S.A., Panama, Panama
ABB S.A., Santiago, Chile ABB S.p.A., Milan, Italy
ABB s.p.r.l., Kinshasa Gombe, Democratic Republic of the Congo
ABB s.r.o., Prague, Czech Republic
ABB Schweiz AG., Baden, Switzerland
ABB Secheron S.A., Satigny, Switzerland
ABB Service Co. Ltd., Al Khobar, Saudi Arabia
ABB Shanghai Motors Co. Ltd., Shanghai, China
ABB Shanghai Transformer Co. Ltd., Shanghai, China
ABB SIA., Riga, Latvia
ABB South Africa (Pty) Ltd., Longmeadow, South Africa
ABB Sp. z o.o., Warsaw, Poland
ABB Stotz-Kontakt GmbH., Heidelberg, Germany
ABB Technologies Ltd., Tirat Carmel, Israel
ABB Technologies S.A., Dakar, Senegal
ABB Technologies W.L.L., Bahrain, Bahrain
ABB Technology Ltd., Zurich, Switzerland
ABB Technology SA., Abidjan, Cote d''Ivoire
ABB Transformers S.A.E., El-Nozha El-Gedida, Egypt
ABB Transmission & Distribution Ltd., Abu Dhabi, United Arab Emirates
ABB Turbo Systems (Hong Kong) Limited., Hong Kong, Hong Kong
ABB Turbo Systems AG., Baden, Switzerland
ABB Turbochargers S.A.E., Suez, Egypt
ABB UAB, Vilnius, Lithuania
ABB Verwaltungs AG., Zurich, Switzerland
ABB Xiamen Electrical Controlgear Co. Ltd., Xiamen, China
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen, China
ABB Xiamen Switchgear Co. Ltd., Xiamen, China
ABB Xi''an High Power Rectifier Company Limited., Xi''an, China
ABB Xi''an Power Capacitor Company Limited., Xi''an, China
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui , China
ABB Zhongshan Transformer Company Ltd., Zhongshan, China
ABB, Inc., Paranaque, Metro Manila, Philippines
ABB, s.r.o., Bratislava, Slovakia
ABBNG Limited., Lagos, Nigeria
Asea Brown Boveri Electrica SGPS (Angola) Limitada., Luanda, Angola
Asea Brown Boveri Lanka (Private) Limited., Colombo, Sri Lanka
Asea Brown Boveri Ltd., Port Louis, Mauritius
Asea Brown Boveri Ltda., Bogota, Colombia
Asea Brown Boveri Ltda., La Paz, Plurinational State of Bolivia
Asea Brown Boveri S.A., Caracas, Venezuela
Asea Brown Boveri S.A., Douala, Cameroon
Asea Brown Boveri S.A., Madrid, Spain
Asea Brown Boveri S.A., Metamorphossis Attica, Greece
Asea Brown Boveri S.A.E., Cairo, Egypt
Baldor Electric (Asia) PTE Ltd., Singapore, Singapore
Baldor Electric (Shanghai) Company Ltd., Shanghai, China
Baldor Electric Company de Mexico SA de CV, El Salto, Jalisco, Mexico
Baldor Electric Company., Fort Smith, AR, United States
Baldor Electric Switzerland AG, Feuerthalen, Switzerland
Baldor Holdings Inc, Boreham, USA
Baldor UK Ltd., Bristol, England, United Kingdom
Busch-Jaeger Elektro GmbH., Mannheim/Ludenscheid, Germany
Electrical Materials Center., Riyadh, Saudi Arabia
K-Tek Level Engineering Pvt. Ltd., Navi Mumbai, India
Maska Power Transmission (Changzhou) Co.Ltd., Changzhou, China
Newave Energy AG., Neuenhof, Switzerland
Newave SA., Quartino, Switzerland
Power-One Italy S.p.A., Siena, Italy
Power-One Renewable Energy Solutions India Private Ltd., Mumbai, India
Power-One Renewable Energy Solutions LLC., Delaware, United States
PT ABB Sakti Industri., Jakarta, Indonesia
Pucaro Elektro-Isolierstoffe GmbH., Roigheim, Germany
Shantou Winride Switchgear Co., Ltd., Longhu District Shantou, China
Striebel & John GmbH & Co. KG., Mannheim, Germany
Sucursal Panama de ABB SA., Panama, Panama
Thomas & Betts Corporation., Knoxville, TN, United States
Thomas & Betts India Private Ltd., Andhra Pradesh, India
Thomas & Betts Power Solutions LLC., Delaware, United States
Trasfor SA., Monteggio, Switzerland
Tropos Networks, Inc., Wilmington, Delaware, United States Turbo
Systems United Co. Ltd., Tokyo, Japan Ventyx (UK) Ltd., Surrey, United
Kingdom Ventyx Inc., Atlanta, United States
Key management personnel:
Managing director: Mr. Bazmi R Husain
Chief financial officer: Mr. Amlan Datta Majumdar
8. Exchange rate variation - (gain) / loss (net) for the year includes
gain on account of fair valuation of foreign exchange forward contracts
for firm trade commitments amounting to Rs.1.03 crores (Previous Year
loss of Rs.3.52 crores).
9. Provisions
a) Movement in provisions: (Figures in brackets are in respect of the
previous year)
b) Nature of provisions:
i) Warranties: The Company provides warranties for its products,
systems and services, undertaking to repair or replace the items that
fail to perform satisfactorily during the warranty period. Provision
made as at December 31,2014 represents the amount of the expected cost
based on technical evaluation and past experience of meeting such
obligations. It is expected that this expenditure will be incurred over
the contractual warranty period.
ii) Provision for sales tax represents mainly the differential sales
tax liability on account of non - collection of declaration forms. The
outflow would depend on the cessation of the respective events.
iii) Provision for litigation represents claims against the Company not
acknowledged as debts that are expected to materialise in respect of
matters in litigation. The outflow would depend on the cessation of the
respective events.
10. The employees of the Company are entitled to purchase shares of ABB
Limited., Zurich (the ultimate holding company) on the settlement date,
at a price fixed based on the fair market price on the grant date under
ABB employee share acquisition plan. During the year, the Company has
been cross charged Rs. 0.08 crores (Previous Year Rs. 1.37 crores) towards
the above including administrative charges and this has been charged in
the statement of profit and loss under the head salaries, wages and
bonus.
The Institute of Chartered Accountants of India has issued a guidance
note on accounting for ''employee share-based payments'', which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged as above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment / disclosure required under the said guidance
note.
11. Derivative Instruments
i) Forward cover for foreign currency trade receivables outstanding as
of balance sheet date is Rs. 349.05 crores (Previous Year Rs. 341.51
crores).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs. 384.91 crores (Previous Year
Rs. 446.77 crores).
iii) Forward cover for foreign currency trade payables outstanding as
of balance sheet date is Rs. 577.89 crores (Previous Year Rs. 772.56
crores).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs. 116.55 crores
(Previous Year Rs. 320.42 crores).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is payable Rs. 267.31 crores (Previous Year
payable is Rs. 190.60 crores).
12. The previous year figures have been regrouped / reclassified, where
necessary, to conform with the current year''s classifications.
Dec 31, 2013
1. Corporate information
ABB India Limited (''the Company'') has served utility and industry
customers for over six decades with the complete range of engineering,
products, solutions and services in areas of Automation and Power
technology. The Company has extensive installed base for manufacturing
and a countrywide marketing and service presence. Besides catering to
Indian domestic market, the Company is also playing an increasing role
in the global market.
2. Amalgamation
a) The Hon''ble High Court of Bombay vide its Order dated September
27, 2013 has sanctioned the Scheme of Amalgamation of Baldor Electric
India Private Limited (Baldor) with ABB India Limited (the Company).
The Scheme has become effective on November 1, 2013 with appointed date
being April 1, 2012. Baldor was a wholly owned subsidiary of the
Company, engaged in trading of motors, drives and other mechanical
products forming part of Discrete Automation and Motion segment of the
Company. With effect from appointed date all rights, duties, powers and
obligations of Baldor have become those of the Company. All the assets
and liabilities, including reserves of Baldor were accounted for using
pooling of interests method in the books of accounts of the Company.
b) Pursuant to and in accordance with the Order of the Hon''ble High
Court of Bombay, the excess of the Company''s cost of acquisition of
equity and preference shares in the Baldor over the par value of the
equity and preference shares cancelled, has been adjusted in the books
of the Company out of the amount available in the General Reserve
account as on December 31, 2011. The amount adjusted is Rs 33.97
crores.
The Hon''ble High Court of Bombay had, while sanctioning the Scheme,
directed that a note in this regard should be prominently included by
the Company in its Statement of Accounts for the financial year ending
on December 31, 2013 submitted for approval of its shareholders. Hence,
this note has been included in compliance with the Court''s Order.
c) Net profit of Rs 2.42 crores of Baldor from the appointed date i.e,
April 1, 2012 to December 31, 2012 of the previous financial year has
been disclosed separately in the current year statement of profit and
loss. The financial results of current year incorporates the operating
results of Baldor.
3. Segment reporting
A) Primary segment reporting (by business segments) i) Composition of
business segments
The Company''s business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems segment (PS) offers turnkey systems and services for
transmission and distribution for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy efficiency through
flexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy efficiency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays, insulation paper and paper board components etc.
Process Automation segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specific
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the financial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the financial
statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimization objective for the Company.
v) Figures in brackets are in respect of the previous year.
4. The Company has taken several premises under cancelable and
non-cancelable operating leases. These lease agreements are normally
for one to ten years and have option of renewal on expiry of lease
period based on mutual agreement. Rental expenses towards cancelable
and non-cancelable operating lease charged to the statement of profit
and loss amounts to Rs 37.71 crores (Previous Year Rs 37.25 crores).
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreement. There are no assets given on operating lease.
5. Research and development expenditure of Rs Nil (Previous Year Rs
8.56 crores) on revenue account has been incurred during the year.
33. Short term borrowings represent unsecured short-term loan and
overdraft facility from banks. The same is repayable on demand and
carries interest @ 9% to 11% p.a.
6. Exchange rate variation - (gain) / loss (net) for the year includes
loss on account of fair valuation of foreign exchange forward contracts
for firm trade commitments amounting to Rs 3.52 crores (Previous Year
gain of Rs 5.68 crores).
7. The employees of the Company are entitled to purchase shares of
ABB Limited., Zurich (the ultimate holding company) on the settlement
date, at a price fixed based on the fair market price on the grant date
under ABB employee share acquisition plan. During the year, the Company
has been cross charged Rs 1.37 crores (Previous Year Rs 0.20 crores)
towards the above including administrative charges and this has been
charged in the statement of profit and loss under the head salaries,
wages and bonus.
The Institute of Chartered Accountants of India has issued a guidance
note on accounting for ''employee share-based payments'', which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged as above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment / disclosure required under the said guidance
note.
8. Derivative Instruments
i) Forward cover for foreign currency trade receivables outstanding as
of balance sheet date is Rs 341.51 crores (Previous Year Rs 455.33
crores).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs 446.77 crores (Previous Year
Rs 208.86 crores).
iii) Forward cover for foreign currency trade payables outstanding as
of balance sheet date is Rs 772.56 crores (Previous Year Rs 673.78
crores).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs 320.42 crores
(Previous Year Rs 501.59 crores).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is payable Rs 190.60 crores (Previous Year
payable is Rs 54.68 crores).
9. Excise duty on sales amounting to Rs 474.78 crores (December 31,
2012: Rs 461.37 crores) has been reduced from sales in the statement of
profit and loss. Excise duty reversal on increase in inventory of
finished goods amounting to Rs 2.43 crores (December 31, 2012: Rs 0.16
crores) has been accounted in the statement of profit and loss under
the head "(Increase)/ decrease in inventories of finished goods,
work-in-progress and traded goods"
10. The Company has entered into contracts for sales of goods with a
private company in which one of the directors of the Company is also a
director which requires approval of the Central Government under
section 297 of the Companies Act, 1956. The Company is in the process
of obtaining the necessary approvals.
11. Pursuant to the amalgamation of Baldor Electric India Private
Limited with the Company, the figures of the current year are not
strictly comparable to those of the previous year. The figures of the
previous year have been regrouped / reclassified, where necessary, to
conform with the current year''s classifications.
Dec 31, 2012
1. Corporate information
ABB Limited (-the Company-) has served utility and industry customers
for over six decades with the complete range of engineering, products,
solutions and services in areas of Automation and Power technology. The
Company has extensive installed base for manufacturing and a
countrywide marketing and service presence. Besides catering to Indian
domestic market, the Company is also playing an increasing role in the
global market.
a) Terms / rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs 2/- per share. Each holder of equity shares is entitled to one vote
per share. The Company declares and pay dividends in Indian Rupees. The
dividend proposed by the Board of Directors is subject to the approval
of the shareholders in the ensuing Annual General Meeting.
During the year ended December 31, 2012, the amount of per share
dividend recognised as distributions to equity shareholders was Rs 3/-.
(December 31, 2011: Rs 3/-)
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
As per records of the Company and other declarations received from
shareholders, the above shareholding represents both legal and
benefcial ownerships of shares.
d) There is no movement in the share capital during the current and
previous year.
2. Proposed amalgamation
The Board of Directors have approved the amalgamation of Baldor
Electric India Private Limited, Pune (a 100% subsidiary of ABB Limited)
with the Company on September 26, 2012. The amalgamation scheme was
fled with the Honourable High Court of Bombay on November 27, 2012. In
terms of the scheme appointed date proposed is April 1, 2012. Pending
approval of the scheme by the High Court, no effects of the
amalgamation has been recognized in the fnancial statements.
3. Acquisitions
a) During the previous year the Company had acquired with effect from
April 1, 2011 three businesses; (a) Transformer Insulation - Boards and
Components, (b) Low Voltage Breakers and Switches and (c) Vacuum
Interrupters from M/s. ABB Global Industries and Services Limited, for
an aggregate consideration of Rs 400.00 crores on a slump sale basis.
Net Assets acquired was Rs 353.58 crores and goodwill capitalized on
acquisition was Rs 46.42 crores.
b) During the previous year the Company had acquired 100% equity shares
of Baldor Electric India Private Limited, Pune (Baldor) from Baldor
Holdings Inc., USA and Baldor Electric Switzerland AG, Switzerland, for
a total consideration of Rs 33.90 crores. Baldor became a wholly owned
subsidiary of the Company effective December 1, 2011.
4. Segment reporting
A) Primary segment reporting (by business segments)
i) Composition of business segments
The Company-s business segments are organized around products and
system solutions provided to its customers, which include utilities,
industries, channel partners and original equipment manufacturers.
Power Systems segment (PS) offers turnkey systems and services for
transmission and distributions for power grid and power plants. The
segment offers the instrumentation, control and the entire balance of
power plants, which improve performance and energy effciency through
fexible alternating current transmission systems, high voltage direct
current systems, network management systems and utility communications.
Power Products segment (PP) manufactures, engineers, supplies key
components to transmit and distribute electricity, improving power
supply and energy effciency. The segment produces transformers, high
and medium voltage switchgears, circuit breakers, capacitors,
distribution relays, insulation paper and paper board components etc.
Process Automation segment (PA) provides customers with integrated
solutions for control, plant optimization and industry specifc
application knowledge. The industries served include oil and gas,
power, chemicals and pharmaceuticals, pulps and paper, metals and
minerals, marine and turbo charging.
Discrete Automation and Motion segment (DM) provides products, with
related services, that are used as components in machinery and
automation systems. The segment covers a wide range of products and
services including power electronics systems, motors and generators,
drives, robots etc.
Low Voltage Products segment (LP) manufactures products and systems
that provide protection, control and measurement for electrical
installations, enclosures, switchboards, electronics and
electromechanical devices for industrial machines, plants and related
service.
ii) The accounting policies used in the preparation of the fnancial
statements of the Company are also applied for segment reporting.
iii) Segment revenues, expenses, assets and liabilities are those,
which are directly attributable to the segment or are allocated on an
appropriate basis. Corporate and other revenues, expenses, assets and
liabilities to the extent not allocable to segments are disclosed in
the reconciliation of reportable segments with the fnancial statements.
iv) Inter segment transfer pricing
Inter segment prices are normally negotiated amongst the segments with
reference to the costs, market prices and business risks, within an
overall optimization objective for the Company.
v) Figures in brackets are in respect of the previous year.
(Rs in Crores)
As at December 31, 2012 2011
5. Contingent liabilities
i) Excise duty / service tax and sales tax
liabilities in dispute 364.68 420.26
ii) Custom duty liabilities in dispute 2.02 3.83
iii) Claims against the Company not
acknowledged as debts 8.85 8.85
iv) Income tax matters in dispute 254.05 19.22
The Company is contesting the demands and the management believes that
its position will likely be upheld in the various appellate authorities
/ courts. The management believes that the ultimate outcome of this
proceeding will not have a material adverse effect on the Company-s
fnancial position.
6. The Company has taken several premises under cancelable and
non-cancelable operating leases. These lease agreements are normally
for one to ten years and have option of renewal on expiry of lease
period based on mutual agreement. Rental expenses towards cancelable
and non-cancelable operating lease charged to the statement of proft
and loss amounts to Rs 37.25 crores (Previous Year Rs 29.56 crores).
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreement. There are no assets given on operating lease.
7. Research and development expenditure of Rs 8.56 crores (Previous
Year Rs 0.40 crores) on revenue account has been incurred during the
year.
8. Short term borrowings represent unsecured overdraft facility from
banks. The same is repayable on demand and carries interest @ 9% to 11%
p.a.
9. Related party disclosures
a) List of related parties
Party where control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asea Brown Boveri Limited, Zurich, Switzerland (Holding Company)
Other Related parties with whom transactions have taken place during
the year:
Subsidiary:
Baldor Electric India Pvt. Ltd., Pune, India (with effect from December
1, 2011)
Remuneration to directors and chief fnancial offcer does not include
provision for leave encashment and gratuity as it is provided in the
books on the basis of actuarial valuation for the Company as a whole.
10. Exchange rate variation - (gain) / loss (net) for the year
includes gain on account of fair valuation of foreign exchange forward
contracts for frm trade commitments amounting to Rs 3.47 crores
(Previous Year gain of Rs 47.15 crores includes gain on frm trade
commitments and embedded derivative contracts).
11. Provisions
a) Movement in provisions: (Figures in brackets are in respect of the
previous year)
b) Nature of provisions:
i) Warranties: The Company provides warranties for its products,
systems and services, undertaking to repair or replace the items that
fail to perform satisfactorily during the warranty period. Provision
made as at December 31, 2012 represents the amount of the expected cost
based on technical evaluation and past experience of meeting such
obligations. It is expected that this expenditure will be incurred over
the contractual warranty period.
ii) Provision for sales tax represents mainly the differential sales
tax liability on account of non-collection of declaration forms. The
outfow would depend on the cessation of the respective events.
iii) Provision for litigation represents claims against the Company not
acknowledged as debts that are expected to materialise in respect of
matters in litigation. The outfow would depend on the cessation of the
respective events.
12. The employees of the Company are entitled to purchase shares of
ABB Limited, Zurich (the ultimate holding company) on the settlement
date, at a price fxed based on the fair market price on the grant date
under ABB employee share acquisition plan. During the year, the Company
has been cross charged Rs 0.20 crores (Previous Year Rs 0.11 crores)
towards the above including administrative charges and this has been
charged in the statement of proft and loss under the head salaries,
wages and bonus.
The Institute of Chartered Accountants of India has issued a guidance
note on accounting for -employee share-based payments-, which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefts in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment / disclosure required under the said guidance
note.
13. Derivative Instruments
i) Forward cover for foreign currency trade receivables outstanding as
of balance sheet date is Rs 455.33 crores (Previous Year Rs 297.80
crores).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs 208.86 crores (Previous Year
Rs 333.99 crores).
iii) Forward cover for foreign currency trade payables outstanding as
of balance sheet date is Rs 673.78 crores (Previous Year Rs 691.75
crores).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs 501.59 crores
(Previous Year Rs 372.58 crores).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is payable Rs 54.68 crores (Previous Year
payable is Rs 64.30 crores).
14. Excise duty on sales amounting to Rs 461.37 Crores (December 31,
2011: Rs 323.29 Crores) has been reduced from sales in the statement of
proft and loss. Excise duty on increase in inventory of fnished goods
amounting to Rs 0.16 Crores (December 31, 2011: Rs 3.63 Crores) has
been accounted in the statement of proft and loss under the head "cost
of raw material and components consumed and project bought outs".
15. The Company has defned beneft gratuity plan and provident fund
plan managed by trusts. The following table summarises the component of
net beneft expenses recognised in the statement of proft and loss and
the funded status and amounts recognised in the balance sheet.
Notes:
i) Gratuity Plan
Gratuity is payable to all eligible employees of the Company as per the
provisions of the Payment of Gratuity Act, 1972 or as per the Company-s
scheme, whichever is higher.
ii) Provident Fund Plan
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The Contribution by employee and
employer together with interest are payable at the time of separation
from service or retirement whichever is earlier.
iii) Assumptions relating to future salary increases, attrition,
interest rate for discount and overall expected rate of return on
assets have been considered based on relevant economic factors such as
infation, market growth and other factors applicable to the period over
which the obligation is expected to be settled.
iv) The Company expects to contribute Rs 16.00 crores (Previous Year Rs
10.60 crores) to gratuity fund and Rs 15.00 crores (Previous Year Rs
18.68 crores) to provident fund in 2013.
v) The attrition rate for gratuity varies from 1% to 8% for various age
groups.
16. The fgures of the previous year have been regrouped / reclassifed,
where necessary, to conform with the current year-s classifcations.
Dec 31, 2011
1. Related Party Disclosures a) List of Related Parties Party where
control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asia Brown Bovary Limited, Zurich, Switzerland (Holding Company)
b) Nature of provisions:
i) Warranties: The Company provides warranties for its products,
systems and services, undertaking to repair or replace the items that
fail to perform satisfactorily during the warranty period. Provision
made as at December 31, 2011 represents the amount of the expected cost
based on technical evaluation and past experience of meeting such
obligations. It is expected that this expenditure will be incurred over
the contractual warranty period.
ii) Provision for Sales Tax represents mainly the differential sales
tax liability on account of non - collection of declaration forms. The
outflow would depend on the cessation of the respective events.
iii) Provision for litigation represents claims against the Company not
acknowledged as debts that are expected to materialise in respect of
matters in litigation. The outflow would depend on the cessation of the
respective events.
2. The employees of the Company are entitled to purchase shares of
ABB Limited, Zurich (the ultimate holding company) on the settlement
date, at a price fixed based on the fair market price on the grant date
under ABB Employee Share Acquisition Plan. During the year, the Company
has been cross charged Rs 1,101 thousand (Previous Year Rs 3,045
thousand) towards the above including administrative charges and this
has been charged in the profit and loss account under the head
Salaries, Wages and Bonus.
The Institute of Chartered Accountants of India has issued a Guidance
Note on Accounting for 'Employee Share-based Payments', which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment/ disclosure required under the said Guidance Note.
3. Derivative Instruments
i) Forward cover for foreign currency debtors outstanding as of balance
sheet date is Rs 2,977,989 thousand (Previous Year Rs 2,120,925
thousand).
ii) Forward cover for expected future sales or highly probable forecast
transactions of balance sheet date is Rs 3,339,859 thousand (Previous
Year Rs 4,044,113 thousand).
iii) Forward cover for foreign currency creditors outstanding as of
balance sheet date is Rs 6,917,460 thousand (Previous Year Rs 6,440,017
thousand).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs 3,725,846 thousand
(Previous Year Rs 4,428,841 thousand).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is Rs 643,043 thousand (Previous Year Rs
431,549 thousand).
4. Sales are net of excise duty amounting to Rs 3,232,891 thousand
(Previous Year Rs 3,222,035 thousand ). Excise duty on increase in
inventory of finished goods amounting to Rs 36,278 thousand (Previous
Year reversal of excise duty Rs 2,328 thousand) has been accounted in
the profit and loss account under the head 'Cost of Materials and
Erection Services'.
Notes :
i) Gratuity Plan
Gratuity is payable to all eligible employees of the Company as per the
provisions of the Payment of Gratuity Act, 1972 or as per the
Companies Scheme, whichever is higher.
ii) Provident Fund Plan
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The Contribution by employee and
employer together with interest are payable at the time of separation
from service or retirement whichever is earlier.
iii) Assumptions relating to future salary increases, attrition,
interest rate for discount and overall expected rate of return on
assets have been considered based on relevant economic factors such as
inflation, market growth and other factors applicable to the period
over which the obligation is expected to be settled.
iv) The Company expects to contribute Rs 105,997 thousand (Previous
Year Rs 96,649 thousand) to Gratuity Fund and Rs 186,754 thousand
(Previous Year Rs 132,327 thousand) to Provident Fund in 2012.
v) The attrition rate for gratuity varies from 1% to 8% for various age
groups.
5. Prior year comparatives
Pursuant to the acquisition of businesses, the figures of the current
year are not strictly comparable to those of the previous year. The
figures of the previous year have been regrouped/reclassified, where
necessary, to conform with the current year's classifications.
Dec 31, 2010
1. Nature of Operations
ABB Limited (the Company) has served utility and industry customers
for over 60 years with the complete range of engineering, products,
solutions and services in areas of Automation and Power technology. The
Company has extensive installed base for manufacturing and a
countrywide marketing and service presence. Besides catering to Indian
domestic market, the Company is also playing an increasing role in the
global market.
(Rs in Thousands)
As at December 31, 2010 2009
2. Contingent Liabilities
i) Claims against the Company not
acknowledged as debts in respect of
sales tax, excise and other matters 2,956,464 1,685,368
ii) Bills discounted - -
The above excludes bills co-accepted by
the customers bankers/guaranteed by the
State Governments Rs 51 thousand
(Previous Year Rs 1,473 thousand)
iii) Income tax matters in dispute 110,936 130,379
The Company does not expect any reimbursements in respect of the above
contingent liabilities and it is not practicable to estimate the
timings of cash outflows, if any, in respect of matters above pending
resolution of the arbitration / appellate proceedings.
3. Estimated amount of contracts remaining to be executed on capita!
account and not provided for (net of advances) 627,364 450,055
4. The Company has taken several premises under cancelable and
non-cancelable operating leases. These lease agreements are normally
for one to ten years and have option of renewal on expiry of lease
period based on mutual agreement. The Company has non-cancelable
operating lease obligations of Rs 48,448 thousand (Previous year Rs
46,533 thousand) payable within one year and Rs 104,802 thousand
(Previous Year Rs 131,949 thousand) payable later than one year but not
later than five years and Rs 55,325 thousand (Previous Year Rs 77,941
thousand) payable later than five years as on December 31, 2010. Rental
expenses towards cancelable and non-cancelable operating lease charged
to the profit and loss account amounts to Rs 191,653 thousand (Previous
Year Rs 230,552 thousand).
Some of the lease agreements have escalation clause ranging from 5% to
15%. There are no exceptional / restrictive covenants in the lease
agreement.
5. Capacities, Production, Stock and Turnover (Refer Schedule 12)
5.1 Capacities
a) Installed capacities are as certified by the Managing Director, but
not verified by the auditors, being a technical matter.
5.2 Production
a) Production of finished goods is inclusive of production for captive
use.
b) "Others" represent internally manufactured components, sold during
the year. The Company considers these meant for sale when actually
sold. Since the quantitative denominations of these items are
dissimilar, it is impracticable to disclose the quantitative
information in respect of production and turnover.
5.3 Project items
a) These comprise sale of equipment and miscellaneous items meant for
execution of projects and trading items. Since the quantitative
denominations of these items are dissimilar, it is impracticable to
disclose the quantitative information in respect thereof.
b) Purchases of these items during the year aggregated to Rs 20,958,914
thousand (Previous Year Rs 23,165,639 thousand).
5.4 Work-in-Progress
a) The Work-in-Progress at the beginning of the year amounted to Rs
2,219,033 thousand (Previous Year Rs 1,899,009 thousand).
6. Interest charge for the year includes Rs Nil (Previous Year Rs 9
thousand) being interest on fixed period loans. During the year the
Company has capitalised interest on borrowing cost Rs Nil (Previous
Year Rs 2,395 thousand).
7. Research and development expenditure of Rs 110,161 thousand
(Previous Year Rs Nil) on revenue account has been incurred during the
year.
8. Related Party Disclosures
a) List of Related Parties
Party where control exists:
ABB Limited, Zurich, Switzerland (Ultimate Holding Company)
ABB Asea Brown Boveri Limited, Zurich, Switzerland (Holding Company)
Other Related parties with whom transactions have taken place during
the year:
Fellow subsidiaries:
ABB (China) Ltd., Beijing, China
ABB (Hong Kong) Ltd., Hong Kong
ABB (Pty) Ltd., Gaborone, Botswana
ABB A/S, Skovlunde, Denmark
ABB AB, Vasteras, Sweden
ABB AG, Mannheim, Germany
ABB AS, Billingstad, Norway
ABB AS, Tallinn, Estonia
ABB Australia Pty Limited, Sydney, Australia
ABB Automation GmbH, Mannheim, Germany
ABB Automation Products GmbH, Ladenburg, Germany
ABB Azerbaijan LLC, Baku, Azerbaijan
ABB Bailey Beijing Engineering Co. Ltd., Beijing, China
ABB Beijing Drive Systems Co. Ltd., Beijing, China
ABB Bomem Inc., Quebec, Canada
ABB BV, Rotterdam, Netherlands
ABB Capital, B.V., Amsterdam, Netherlands
ABB Chongqing Transformer Company Ltd., Chongqing, China
ABB CL Logistic S.A., Montevideo, Uruguay
ABB Contracting Company Ltd., Riyadh, Saudi Arabia
ABB d.o.o., Belgrade, Serbia
ABB D.o.o., Ljubljana, Slovenia
ABB Electrical Industries Ltd., Riyadh, Saudi Arabia
ABB Electrical Machines Ltd., Shanghai, China
ABB Electroengineering Ltd., Moscow, Russian Federation
ABB Elektrik Sanayi A.S., Istanbul, Turkey
ABB Engg. Technologies Co. (KSCC), Safat, Kuwait
ABB Engineering (Shanghai) Ltd., Shanghai, China
ABB Engineering Trading and Service Ltd., Budapest, Hungary
ABB ESAP Limited, St. Peters Port, Guernsey
ABB France SAS, Rueil Malmaison cedex, France
ABB FZ-LLC, Dubai, United Arab Emirates
ABB Global Industries and Services Limited, Bangalore, India
ABB Global Marketing FZ LLC, Dubai, United Arab Emirates
ABB High Voltage Switchgear (Xiamen) Company Ltd., Xiamen, China
ABB High Voltage Switchgear Co. Ltd., Beijing, China
ABB Holding AS, Billingstad, Norway
ABB Holdings (Pty) Ltd., Sunninghill, South Africa
ABB Holdings Sdn. Bhd., Subang Jaya, Malaysia
ABB Inc., Norwalk CT, United States of America
ABB Inc., St. Laurent, Quebec, Canada
ABB Industries (L.L.C.), Dubai, United Arab Emirates
ABB Industries FZ, Dubai, United Arab Emirates
ABB LV Installation Materials Co. Ltd., Beijing, China
ABB Malaysia Sdn Bhd., Subang Jaya, Malaysia
ABB Management Services Ltd., Zurich, Switzerland
ABB Mexico S.A. de C.V., Tlalnepantla, Mexico
ABB N.V., Zaventem, Belgium
ABB Near East Trading Ltd., Amman, Jordan
ABB Oy, Helsinki, Finland
ABB Power Systems and Automation Technology S.A.E, Cairo, Egypt
ABB Pte. Ltd., Singapore, Singapore
ABB Qatar LLC, Doha, Qatar
ABB Research Ltd., Zurich, Switzerland
ABB S.A. de CV, San Salvador, El Salvador
ABB S.A., Buenos Aires, Argentina
ABB S.A., Casablanca, Morocco
ABB S.A., Lima, Peru
ABB S.A., Panama, Panama
ABB S.A., Rueil-Malmaison, France
ABB S.A., Santiago, Chile
ABBS.p.A., Milan, Italy
ABB s.r.o., Prague, Czech Republic
ABB Schweiz AG, Baden, Switzerland
ABB Secheron S.A., Satigny, Switzerland
ABB Service (Private) Ltd., Harare, Zimbabwe
ABB Service Co. Ltd., Al Khobar, Saudi Arabia
ABB Shanghai Motors Co. Ltd., Shanghai, China
ABB South Africa (Pty) Ltd., Modderfontein, South Africa
ABB Sp. zo.o., Warsaw, Poland
ABB SRL, Bucharest, Romania
ABB Stotz-Kontakt GmbH, Heidelberg, Germany
ABB Technologies S.A., Dakar, Senegal
ABB Technologies W.L.L., Bahrain, Bahrain
ABB Technology AB, Vasteras, Sweden
ABB Technology Ltd., Zurich, Switzerland
ABB Technology SA, Abidjan, Cote Dlvoire
ABB Transmission & Distribuition Automation Equipment (Xiamen)
Co. Ltd., Xiamen, China
ABB Transmission & Distribution Ltd., Abu Dhabi, United Arab Emirates
ABB Trasmissione & Distribuzione S.p.A., in liquidazione, Milan,Italy
ABB Turbo Systems (Hong Kong) Limited, Hong Kong, Hong Kong
ABB Turbochargers S.A.E., Suez, Egypt
ABB Turbo-Systems AG, Baden, Switzerland
ABB UAB, Vilnius, Lithuania
ABB Xiamen Electrical Controlgear Co. Ltd., Xiamen, China
ABB Information Systems Ltd., Zurich, Switzerland
ABB Instrumentation Ltd., Warrington, United Kingdom
ABB International Marketing Ltd., Zurich, Switzerland
ABB Intra AG, Zurich, Switzerland
ABB Jiangjin Turbo Systems Company Limited, Chongqing, China
ABB K.K., Tokyo, Japan
ABB Limited, Auckland, New Zealand
ABB LIMITED, Bangkok, Thailand
ABB Limited, Nairobi, Kenya
ABB Limited, Warrington, United Kingdom
ABB LLC, Al Hamriya, Oman
ABB LLP., Almaty, Kazakhstan
ABB Logistics Center Europe GmbH, Menden, Germany
ABB Ltd, Dublin, Ireland
ABB Ltd., Hanoi, Vietnam
ABB Ltd., Kiev, Ukraine
ABB Ltd., Lusaka, Zambia
ABB Ltd., Moscow, Russian Federation
ABB Ltd., Seoul, Korea, Republic Of Korea
ABB Ltd., Taipei, Taiwan, Province Of China
ABB Ltd., Zagreb, Croatia
ABB Ltd., Osasco, Brazil
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen, China
ABB Xiamen Switchgear Co. Ltd., Xiamen, China
ABB Xian Power Capacitor Company Limited, Xian, China
ABB Xinhui Low Voltage Switchgear Co. Ltd., Xinhui, China
ABB, Inc., Paranaque, Metro Manila, Philippines
ABB, s.r.o., Bratislava, Slovakia
ABBNG Limited, Lagos, Nigeria
Asea Brown Boveri (Pty) Ltd., Windhoek, Namibia
Asea Brown Boveri Electrica SGPS (Angola) Limitada, Luanda, Angola
Asea Brown Boveri Ltd., Port Louis, Mauritius
Asea Brown Boveri Ltda., Bogota, Colombia
Asea Brown Boveri Ltda., La Paz, Bolivia
Asea Brown Boveri S.A., Madrid, Spain
Asea Brown Boveri S.A., Metamorphossis Attica, Greece
Asea Brown Boveri S.A.E., Cairo, Egypt
Busch-Jaeger Elektro GmbH, Mannheim/Ludenscheid, Germany
Electrical Materials Center, Riyadh, Saudi Arabia
PT ABB Installation Materials, Jakarta, Indonesia
PT ABB Jasa Indonesia, Jakarta, Indonesia
PT ABB Sakti Industri, Jakarta, Indonesia
PT ABB Transmission and Distribution, Jakarta, Indonesia
Pucaro Elektro-lsolierstoffe GmbH, Roigheim, Germany
Turbo Systems United Co. Ltd., Tokyo, Japan
Remuneration to directors and chief financial officer does not include
Provision for Leave Encashment and Gratuity as it is provided in the
books on the basis of actuarial valuation for the Company as a whole.
During the previous year the remuneration to Whole-time Director Mr. K
Rajagopal for the year ended December 31,2009 is for the period from
January 1 to July 31,2009. The remuneration to Chief Financial Officer
includes payment made to Mr. K Rajagopal for the period August 1 to
August 31,2009 and to Mr. Amlan Datta Majumdar for the period September
1 to December 31,2009.
9. Exchange rate variation - (Gain) / Loss (net) for the year includes
loss on account of fair valuation of foreign exchange forward contracts
for firm trade commitments and embedded derivative contracts amounting
to Rs 562,025 thousand (Previous Year Rs 112,395 thousand). The pro
rata difference between the forward contract rate and the exchange rate
on the date of transaction to be charged to profit and loss account is
Rs 59,625 thousand (Previous Year Rs 58,223 thousand).
10. The employees of the Company are entitled to purchase shares of ABB
Limited., Zurich (the ultimate holding company) on the settlement date,
at a price fixed based on the fair market price on the grant date under
ABB Employee Share Acquisition Plan. During the year, the Company has
been cross charged Rs 3,045 thousand (Previous Year Rs 15,462 thousand)
towards the above including administrative charges and this has been
charged in the profit and loss account under the head Salaries, Wages
and Bonus.
The Institute of Chartered Accounants of India has issued a Guidance
Note on Accounting for Employee Share-based Payments, which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged above.
Accordingly, the Company is of the opinion that there is no further
accounting treatment/ disclosure required under the said Guidance Note.
11. Derivative Instruments
i) Forward cover for foreign currency debtors outstanding as of balance
sheet date is Rs 2,120,925 thousand (Previous Year Rs 1,292,530
thousand).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs 4,044,113 thousand (Previous
Year Rs 2,979,301 thousand).
iii) Forward cover for foreign currency creditors outstanding as of
balance sheet date is Rs 6,440,017 thousand (Previous Year Rs 6,748,480
thousand).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs 4,428,841 thousand
(Previous Year Rs 1,929,404 thousand).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is Rs 431,549 thousand (Previous Year Rs
668,879 thousand).
12. Sales are net of excise duty amounting to Rs 3,222,035 thousand
(Previous Year Rs 2,573,696 thousand) and liquidated damages amounting
to Rs 1,128,098 thousand (Previous Year Rs 173,470 thousand). Reversal
of excise duty on increase in inventory of finished goods amounting to
Rs 2,328 thousand (Previous Year charge of Rs 9,575 thousand) has been
accounted in the profit and loss account under the head Cost of
Materials and Erection Services.
13. The figures of the previous year have been regrouped/reclassified,
where necessary, to conform with the current years classifications.
Dec 31, 2009
1. Nature of Operations
ABB Limited (the Company) has served utility and industry customers
for over 60 years with the complete range of engineering, products,
solutions and services in areas of Automation and Power technology. The
Company has extensive installed base for manufacturing and a
countrywide marketing and service presence. Besides catering to Indian
domestic market, the Company is also playing an increasing role in the
global market.
(Rs in Thousands)
Rest of
India Total
Word
2. Contingent Liabilities
i) Claims against the Company
not acknowledged as debts
in respect of sales tax,
excise and 1,685,368 1,307,042
other matters
ii) Bills discounted
The above excludes bills co-accepted
by the customers bankers/guaranteed - -
by the State Governments Rs 1,473
thousand (Previous Year Rs 17,774
thousand)
iii) Income tax matters in dispute 130,379 83,637
3. Estimated amount of contracts
remaining to be executed on capital
account and not provided for (net of 450,055 1,090,215
advances)
4. The Company has taken several premises under cancelable and
non-cancelable operating leases. These lease agreements are normally
for one to ten years and have option of renewal on expiry of lease
period based on mutual agreement. The Company has non-cancelable
operating lease obligations of Rs 46,533 thousand (Previous year Rs
63,296 thousand) payable within one year and Rs 131,949 thousand
(Previous Year Rs 130,213 thousand) payable later than one year but not
later than five years and Rs 77,941 thousand (Previous Year Rs Nil)
payable later than five years as on December 31,2009. Rental expenses
towards cancelable and non-cancelable oprating lease charged to the
profit and loss account amounts to Rs 230,552 thou- sand (Previous Year
Rs 207,197 thousand).
5. Capacities, Production, Stock and Turnover (Refer Schedule 12)
5.1 Capacities
a) Installed capacities are as certified by the Managing Director, but
not verified by the auditors, being a technical matter.
5.2 Production
a) Production of finished goods is inclusive of production for captive
use.
b) "Others" represent internally manufactured components, sold during
the year. The Company considers these meant for sale when actually
sold. Since the quantitative denominations of these items are
dissimilar, it is impracticable to disclose the quantitative
information in respect of production and turnover.
5.3 Project items
a) These comprise sale of equipment and miscellaneous items meant for
execution of projects and trading items. Since the quantitative
denominations of these items are dissimilar, it is impracticable to
disclose the quantitative information in respect thereof.
b) Purchases of these items during the year aggregated to Rs 23,165,639
thousand (Previous Year Rs 26,181,596 thousand).
5.4 Work-in-Progress
a) The Work-in-Progress at the beginning of the year amounted to Rs
1,899,009 thousand (Previous Year Rs 1,262,058 thousand).
6. Interest charge for the year includes Rs 9 thousand (Previous Year
Rs 4,387 thousand) being interest on fixed period loans. During the
year the Company has capitalised interest on borrowing cost Rs 2,395
thousand (Previous Year Rs 21,293 thousand).
7. Research and development expenditure of Rs Nil (Previous Year Rs
21,715 thousand) on revenue account has been incurred during the year.
8 Related Party Disclosures a) List of Related Parties
Party where control exists:
ABB Asea Brown Boveri Limited, Zurich (Holding Company)
Other Related parties with whom transactions have taken place during
the year: Fellow subsidiaries:
ABB (China) Ltd., Beijing, China
ABB (Hong Kong) Ltd., Hong Kong, Hong Kong
ABB (P.J.S.C), Teheran, Iran
ABB (Pvt) Ltd., Lahore, Pakistan
ABB A/S, Skovlunde, Denmark
ABB AB, Vasteras, Sweden
ABB AG, Mannheim, Germany
ABB AG, Vienna, Austria
ABB AS, Billingstad, Norway
ABB AS, Tallinn, Estonia
ABB Australia Pty Limited, Sydney, Australia
ABB Automation Co. Ltd., Riyadh, Saudi Arabia
ABB Automation GmbH, Mannheim, Germany
ABB Automation L.L.C., Abu Dhabi, United Arab Emirates
ABB Automation LLC, Moscow, Russian Federation
ABB Automation Products GmbH, Ladenburg, Germany
ABB Bailey Beijing Controls Co. Ltd., Beijing, China
ABB Beijing Drive Systems Co. Ltd., Beijing, China
ABB Bomem Inc., Quebec, Canada
ABB BV, Rotterdam, Netherlands
ABB Capital, B.V., Amsterdam, Netherlands
ABB Chongqing Transformer Company Ltd., Chongqing City, China
ABB CL Logistic S.A., Montevideo, Uruguay
ABB Contracting Company. Ltd., Riyadh, Saudi Arabia
ABB d.o.o., Belgrade, Serbia
ABB Ecuador S.A., Quito, Ecuador
ABB Electrica SGPS, Lda., Luanda, Angola
ABB Electrical Industries Ltd., Riyadh, Saudi Arabia
ABB Electrical Machines Ltd., Shanghai, China
ABB Electroengineering Ltd., Moscow, Russian Federation
ABB Elektrik Sanayi A.S., Istanbul, Turkey
ABB Malaysia Sdn Bhd, Subang Jaya, Malaysia
ABB Management Services Ltd., Zurich, Switzerland
ABB Mexico S.A. de C.V., Tlalnepantia, Mexico
ABB N.V., Zaventem, Belgium
ABB Near East Trading Ltd., Amman, Jordan
ABB Oy, Helsinki, Finland
ABB Power Systems and Automation Techology S.A.E, Cairo, Egypt
ABB Qatar LLC, Doha, Qatar
ABB S.A., Buenos Aires, Argentina
ABB S.A. Casablanca, Morocco
ABB S.A. Lima, Peru
ABB S.A. Panama, Panama
ABB S.A., Rueil-Malmaison, France
ABB S.A., Santiago, Chile
ABB S.p.A., Milan, Italy
ABB s.r.o., Praque, Czech Republic
ABB Schweiz AG, Baden, Switzerland
ABB Secheron S.A., Satigny, Switzerland
ABB Service Co. Ltd., Al Khobar, Saudi Arabia
ABB Shanghai Motors Co. Ltd., Sanghai, China
ABB South Africa (Pty) Ltd, Sunninghill, South Africa
ABB Sp. zo.o., Warsaw, Poland
ABB Stotz-Kontaki GmbH, Heidelberg, Germany
ABB Technologies Ltd., Tirat Carmel, Israel
ABB Technologies W.L.L, Bahrain, Bahrain
ABB Technology AB, Vasteras, Sweden
ABB Technology Ltd., Zurich, Switzerland
ABB Technology SA, Abidjan, Cote Dlvoire
ABB Ltd., Taipei, Taiwan, Province Of China
ABB Ltd., Zagreb, Croatia
ABB Ltda., Osasco, Brazil
ABB Engg. Technologies Co. (KSCC), Safat, Kuwait ABB Engineering
(Shanghai) Ltd., Shanghai, China
ABB Engineering Trading and Service Ltd., Budapest, Hungary
ABB ESAP Limited, St. Peters Port, Guernsey
ABB France SAS, Rueil Malmaison cedex, France
ABB Global industries and Services Limited, Bengaluru, India
ABB High Voltage Switchgear Co. Ltd., Beijing, China
ABB Holdings (Pty) Ltd., Sunninghill, South Africa
ABB Holdings Sdn. Bhd., Subang Jaya, Malaysia
ABB Inc., Norwalk, CT, United States
ABB Inc., St. Laurent, Quebec, Canada
ABB Industries (L.L.C.), Dubai, United Arab Emirates
ABB Industries FZ, Dubai, United Arab Emirates
ABB Industriunderhall AB, Degerfors, Sweden
ABB Industry Pte. Ltd., Singapore
ABB Information Systems Ltd., Zurich, Switzerland
ABB International Marketing Ltd., Zurich, Switzerland
ABB Jiangjin Turbo Systems Company Limited, Chongqing, China
ABB K.K. Tokyo, Japan
ABB Limited, Auckland, New Zealand
ABB Limited, Bangkok, Thailand
ABB Limited, Dar Es Salaam, Tanzania
ABB Limited, Warrington, United Kingdom
ABB Logistics Center Europe GmbH, Menden, Germany
ABB Ltd., Dublin, Ireland
ABB Ltd., Jordan, Amman, Jordan
ABB Ltd., Hanoi, Vietnam
ABB Ltd., Kiev, Ukraine
ABB Ltd., Lusaka, Zambia
ABB Ltd., Seoul, South Korea
ABB LV Installation Materials Co. Lid., Beijing, China
ABB Transmission & Distribuition Automation Equipment (Xiamen) Co.
Ltd., Fujian, China
ABB Transmissione & Distribution Ltd., Abu Dhabi, United Arab Emirates
ABB Turbo Systems (Hong Kong) Limited, Hong Kong, Hong Kong
ABB Turbo-Systems AG, Baden, Switzerland
ABB UAB, Vilnius, Lithuania
ABB Xiamen Electrical Controlgear Co. Ltd., Fujian Province, China
ABB Xiamen Low Voltage Equipment Co. Ltd., Xiamen, China
ABB Xiamen Switchgear Co. Ltd., Xiamen, China
ABB, Xiamen Power Capacitor Company Limited, Xian, China
ABB, Xinhui Low Voltage Switchgear Co, Ltd., Xinhui (Guangdong), China
ABB, Inc., Paranaque, Metro Manila, Philippines
ABB, s.r.o, Bratislava, Slovakia
ABBNG Limited, Abuja, Nigeria
Asea Brown Boveri Ltd., Port Louis, Mauritius
Asea Brown Boveri Ltda., Bogota, Columbia
Asea Brown Boveri Ltda., La Paz, Bolivia
Asea Brown Boveri S.A., Caracas, Venezuela
Asea Brown Boveri S.A., Madrid, Spain
Asea Brown Boveri S.A., Metamorphossis Attica, Greece
Asea Brown Boveri S.A.E., Cairo, Egypt
Busch-Jaeger Elektro GmbH, Mannheim/Ludenscheid, Germany
Electrical Materials Center, Riyadh, Saudi Arabia
PT ABB Installation Materials, Jakarta, Indonesia
PT ABB Jasa Indonesia, Jakarta, Indonesia
PT ABB Sakti Industri, Jakarta, Indonesia
PT ABB Transmission and Distribution, Jakarta, Indonesia
Pucaro Elektro-lsolierstoffe GmbH, Roigheim, Germany
Associate: (erstwhile)
Integra Hindustan Control Limited
(ceased to be associate from 25th April, 2008 on divestment of shares
by the Company)
Key Management Personnel:
Managing Director: Mr. Biplab Majumder
Whole-time Director: Mr. K Rajagopal (ceased to be director w.e.f.
August 1, 2009)
Chief Financial Officer: Mr. Amlan Datta Majumdar (w.e.f. September 1,
2009)
Mr. K Rajagopal (From August 1, 2009 to August 31, 2009)
xv) Remuneration to Chief Financial Officer
Remuneration to directors and chief financial officer does not include
provision for leave encashment and gratuity as it is provided in the
books on the basis of actuarial valuation for the Company as a whole.
The remuneration to Whole-time Director Mr. K Rajagopal for the year
ended December 31, 2009 is for the period from January 1 to July 31,
2009. The remuneration to Chief Financial Officer includes payment made
to Mr. K Rajagopal for the period August 1 to August 31, 2009 and to
Mr. Amlan Datta Majumdar for the period September 1 to December 31,
2009. The remuneration to Whole-time Director for 2008 to Mr. K
Rajagopal is for the period February 19, 2008 to December 31, 2008. The
remuneration to Chief Financial Officer Mr. K Rajagopal for 2008 is for
the period upto February 18, 2008.
9. The pro rata difference between the forward contract rate and the
exchange rate on the date of transaction to be charged to profit and
loss account is Rs 58,223 thousand (Previous Year Rs 5,024 thousand).
10. The employees of the Company are entitled to purchase shares of
ABB Asea Brown Boveri Ltd., Zurich (the ultimate holding company) on
the settlement date, at a price fixed based on the fair market price on
the grant date under ABB Employee Share Acquisition Plan. During the
year, the Company has been cross charged Rs 15,462 thousand (Previous
Year Rs 35,567 thousand) towards the above including administrative
charges and this has been charged in the profit and loss account under
the head Salaries, Wages and Bonus.
The Institute of Chartered Accounants of India has issued a Guidance
Note on Accounting for Employee Share-based Payments, which is
applicable to employee share based payment plans. The scheme detailed
above is managed and administered, compensation benefits in respect of
the scheme is assessed and accounted by the ultimate holding company,
except for the obligation towards expenses cross charged above.
Accordingly, the company is of the opinion that there is no further
accounting treatment/ disclosure required under the said Guidance Note.
11. Derivative Instruments
i) Forward cover for foreign currency debtors outstanding as of balance
sheet date is Rs 1,292,530 thousand (Previous Year Rs 2,352,388
thousand).
ii) Forward cover for expected future sales or highly probable forecast
transaction as of balance sheet date is Rs 2,979,301 thousand (Previous
Year Rs 2,922,990 thousand).
iii) Forward cover for foreign currency creditors outstanding as of
balance sheet date is Rs 6,748,480 thousand (Previous Year Rs 6,896,877
thousand).
iv) Forward cover for expected future purchases or highly probable
forecast transaction as of balance sheet date is Rs 1,929,404 thousand
(Previous Year Rs 6,998,974 thousand).
v) Foreign currency exposure (net) that are not hedged by derivative
instruments or otherwise is Rs 668,879 thousand (Previous Year Rs
136,072 thousand).
12. Excise duty on sales amounting to Rs 2,573,696 thousand (Previous
Year Rs 5,032,076 thousand) has been reduced from sales in profit and
loss account and excise duty on increase in inventory of finished goods
amounting to Rs 9,575 thousand (Previous Year Rs 453 thousand) has been
accounted in the profit and loss account under the head Cost of
Materials and Erection Services.
13. The Company has defined benefit gratuity plan and provident fund
plan managed by trusts. The following table summarises the component of
net benefit expenses recognised in the profit and loss account and the
funded status and amounts recognised in the balance sheet.
14. The figures of the previous year have been regrouped /
reclassified, where necessary, to conform with the current years
classifications.
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