Notes to Accounts of 3M India Ltd.

Mar 31, 2025

l) Provisions and contingent liabilities

i) General

Provisions are recognised when the Company
has a present obligation (legal or constructive)
as a result of a past event, it is probable that
an outflow of resources embodying economic
benefits will be required to settle the obligation
and a reliable estimate can be made of the amount
of the obligation. When the Company expects
some or all of a provision to be reimbursed.
The expense relating to a provision is presented
in the Statement of profit and loss net of any
reimbursement.

If the effect of the time value of money is material,
provisions are discounted using a current pre¬
tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting
is used, the increase in the provision due to the
passage of time is recognised as a finance cost.

ii) Contingent liabilities

A disclosure for contingent liabilities is made
where there is a possible obligation or a present
obligation that may probably not require an

outflow of resources. When there is a possible
or a present obligation where the likelihood of
outflow of resources is remote, no provision or
disclosure is made.

iii) Onerous contracts

Provision for onerous contracts. i.e. contracts
where the expected unavoidable cost of meeting
the obligations under the contract exceed the
economic benefits expected to be received
under it, are recognised when it is probable that
an outflow of resources embodying economic
benefits will be required to settle a present
obligation as a result of an obligating event based
on a reliable estimate of such obligation.

m) Leases

As a lessee

The Company recognises a right-of-use asset and a
lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or before
the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less
any lease incentives received.

The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement
date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term.
The estimated useful lives of right-of-use assets are
determined on the same basis as those of property,
plant and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if
any, in Statement of profit and loss and adjusted for
certain re-measurements of the lease liability.

The lease liability is initially measured at the present
value of the lease payments that are not paid at
the commencement date, discounted using the its
incremental borrowing rate as the discount rate.

The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when
there is a change in future lease payments arising from
a change in an index or rate, if there is a change in
the Company’s estimate of the amount expected to
be payable under a residual value guarantee, or if
Company changes its assessment of whether it will
exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in

statement of profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.

The Company determines its incremental borrowing
rate by obtaining interest rates from various external
financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset
leased.

The Company presents right-of-use assets that do not
meet the definition of investment property separately
in the balance sheet and lease liabilities separately
within ‘Financial Liabilities’.

Short-term leases and leases of low-value assets

The Company has elected not to recognise right-of-
use assets and lease liabilities for short-term leases
that have a lease term of 12 months. The Company
recognises the lease payments associated with these
leases as an expense on a straight-line basis over the
lease term.

n) Segment reporting
Operating segments

Operating segments are reported in a manner
consistent with the internal reporting provided to
the Chief Operating Decision Maker (CODM). The
Director of the Company is responsible for allocating
resources and assessing performance of the operating
segments and accordingly is identified as the CODM.
Refer note 31 for segment information presented.

o) Cash and cash equivalents

The Company considers all highly liquid investments,
which are readily convertible into known amounts of
cash that are subject to an insignificant risk of change
in value to be cash equivalents. Cash and cash
equivalents consist of balances with banks which are
unrestricted for withdrawal and usage.

p) Earnings per share

Basic Earnings Per Share (‘EPS’) is computed by dividing
the net profit attributable to the equity shareholders
by the weighted average number of equity shares
outstanding during the year.

For the purpose of calculating diluted earnings per
share, the net profit/ loss for the period attributable
to the equity shareholders and the weighted average
number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity
shares. The Comapny does not have any dilutive
equity shares.

q) Cash flow statement

Cash flows are reported using indirect method,
whereby net profits before tax is adjusted for the
effects of transactions of a non-cash nature and any
deferrals or accruals of past or future cash receipts
or payments. The cash flows from regular revenue
generating (operating activities), investing and
financing activities of the Company are segregated.

r) Government grants

The Company recognises unconditional government
grant related to Package Scheme of Incentive (PSI)
scheme in statement of profit and loss under other
income when the grant becomes receivable.

s) Recent Indian Accounting Standards :

Ministry of Corporate Affairs (“MCA”) notifies new
standards or amendments to the existing standards
under companies (Indian Accounting Standards) Rules
as issued from time to time. For the year ended March
31, 2025, MCA has notified Ind AS - 117 Insurance
Contracts and amendments to Ind AS 116 - Leases,
relating to sale and leaseback transactions, applicable
to the Company w.e.f April 01, 2024. The Company
has reviewed the new pronouncements and based on
its evaluation has determined that it does not have any
significant impact in its financial statements.

27 INTER COMPANY AGREEMENTS AND ARRANGEMENTS

a) Intellectual property agreement (Royalty expense)- The Company has entered into Intellectual Property
agreement with 3M Innovative Properties Company and 3M Company, USA effective July 01, 2006 for the
payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from
July 01, 2006 to June 30, 2009. The Intellectual Property Agreement with 3M Innovative Properties Company
and 3M Company, USA has been revised effective April 01, 2023. Accordingly, the Company has incurred an
expenditure of '' 7,548.06 lakhs for the year ended March 31, 2025 (March 31, 2024: '' 8,142.88 lakhs) and
disclosed as Royalty under other expenses (refer note 25).

b) Corporate management fees - In order to avail economies of scale, the Company has entered into inter-company
services support services agreement with 3M Global Service Center Management Company, USA (having
expertise in establishing, operating and managing international business and incurring costs in developing,
manufacturing, marketing and selling a diverse portfolio of products) with effect from April 01, 2019. The
Company is charged with comprehensive support services charges by 3M Global Service Center Management
Company for the services received from all the 3M group companies in the areas of Laboratory, Technical
assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology,
Routine Administration and Foreign Services Employees Expenses and Outsourced Services of Transaction
Processing on competitive conditions. Accordingly, the Company has incurred an expenditure of '' 12,417.63
lakhs for the year ended March 31, 2025 (March 31, 2024: '' 12,757.50 lakhs) and disclosed as corporate
management fee under other expenses (refer note 25).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative
Properties Company and 3M Company, USA effective July 01, 2006 for carrying out contract research activities.
During the year, Company has recognized an income of '' 2,239.65 lakhs (March 31, 2024 : '' 1,332.95 lakhs).

28 EMPLOYEE STOCK OPTION PLAN

a) Description of share based payment arrangements

Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, eligible
employees of the Company are entitled to acquire shares of 3M Company, USA via stock options i.e., stock
appreciation rights (SARs) and restricted stock units (RSUs). The eligible employees are granted stock options
i.e., stock appreciation rights (SARs) and restricted stock units (RSUs) which will vest with the employees over
a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period
mentioned in the plan. In case of SARs, the employee (on the date of exercise) gets the compensation as a
difference between market price on the date of exercise and grant date fair value. In case of RSUs, the employee
(on the date of exercise) gets the compensation which is equal to market price on the date of exercise. As of the
year end a sum of '' 5,096.57 lakhs (March 31, 2024: '' 1,425.84 lakhs) is liability and the same is included as
''Employee benefit obligation'' under Other financial liabilities (refer note 16).

d) Expense recognised in Statement of profit and loss

An amount of '' 2,658.91 lakhs has been debited (March 31, 2024: '' 257.70 lakhs has been debited) to the
statement of profit and loss for the year and included under Employee benefit expenses.

e) The weighted average share price at the date of exercise with regards to SARs and RSUs exercised during the
year is USD 151.45 and USD 149.87 respectively (March 31, 2024: USD Nil and USD 94.87 respectively)

29 EMPLOYEE BENEFITS

a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF) and Superannuation
Fund (SF). Contribution to SF is made to 3M India Limited Employees Superannuation Fund Trust and 3M E & C
India Employees Superannuation Fund Trust. Other contributions are made to the Government’s funds. While
both the employees and the Company pay predetermined contributions into the Provident Fund, contributions
into superannuation fund are made only by the Company. The contributions are normally based on a certain
proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the statement of profit and loss, which
are included in contribution to provident and other funds:

31 SEGMENT REPORTING

A) Basis for segmentation

Ind AS 108 establishes standards for the way that public business enterprises report information about operating
segments and related disclosures about products and services, geographic areas, and major customers. Based
on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates
the Company''s performance and allocates resources based on an analysis of various performance indicators by
segments. The accounting principles used in the preparation of the financial statements are consistently applied
to record revenue and expenditure in individual segments, and are as set out in the significant accounting policies.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of
total turnover. Accordingly, there are no reportable geographical segments. The Company has four reportable
segments, as described below.

For each of the segments, the Company''s Managing Director, who is the CODM, reviews internal management
reports on at least a quarterly basis.

Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of
the segments. Other unallocable income net off unallocable expenditure are towards common services to the
segments which are not directly identifiable to the individual segments as well as those at a corporate level which
relate to the Company as a whole.

B) Information about reportable segments

Information regarding the results of each reportable segment is included below. Performance is measured based
on segment profit (before tax), as included in the internal management reports that are reviewed by the CODM.
Segment profit is used to measure performance as management believes that such information is the most relevant
in evaluating the results of certain segments relative to other entities that operate within these industries.

No customers have individually accounted for more than 10% of the revenues during the years ended March 31,
2025 and March 31, 2024.

Notes:

i) Income tax matters mainly relate to transfer pricing adjustments made by the Income tax authorities with respect
to disallowance of intercompany charges related to corporate management fees. Further, the Company has
opted VSV Scheme for certain years and accordingly have created a provision and hence excluded from the
contingent liability disclosure as at March 31, 2025 (refer note 34).

ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding
differential duty, interest and penalty of ''1,961.50 lakhs, contending the availment of concessional import
duty in respect of some of its products for which a demand notice was served on the Company for payment of
the above amount. The Company has filed an appeal against the order including for obtaining a stay against any
recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

iii) The Company was issued a Show Cause Notice dated December 08, 2016 by the Directorate of Revenue
Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and
services and hence proposing to demand differential duty of customs covering the transactions during the period
December 08, 2011 to February 7, 2014. The Company has received an order in original on October 1, 2017
from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for custom duty in
show cause notice amounting to ''7,693.52 lakhs, penalty equivalent to the custom duty amount and additional
penalty and interest of ''1,000 lakhs. The Company has executed bank guarantee of '' 1,000 lakhs. The Company
has filed an appeal against this order with CESTAT, Mumbai after making payment of deposit of '' 577.00 lakhs.

iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax
Act, 2003. These are pertaining to the years from 2006-07 to 2017-18. These cases are with respect to the
applicable rate of tax for various products and matters pertaining to declaration forms.

v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company
without registering as an Input service distributor.

vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central
Excise Act and Valuation/ allowability of CENVAT credit under the Central Excise Act.

vii) The Goods and service tax matter relates to classification, disallowances of input tax credit for the year 2017 to
2024, notices received upon GST Audits for year 2017-18 to 2019-20, and transition of credit through TRAN-1
for year 2016-17 and 2017-18.

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the
short-term nature of these instruments.

B) Financial Risk Management

The Company has exposure to the following risk arising from financial instruments:

- Credit risk

- Liquidity risk

- Market risk

i) Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables.
The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s
principal financial assets include trade and other receivables, cash and cash equivalents that are derived
directly from its operations.

ii) Credit risk

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

a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to
employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables
from related parties which are not credit impaired. These are contractually agreed with either banks,
related parties or employees where the probability of default is negligible.

b) Financial assets that are credit impaired

Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed
individually for creditworthiness before the Company’s standard payment and delivery terms and
conditions are offered. The Company’s review includes external ratings, if they are available. Sale
limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses
in respect of trade receivables.

Expected credit loss assessment for the Company as at March 31, 2025 and 2024:

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets
of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more
than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate
for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating expected credit losses, the Company considers reasonable and
supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Company’s historical experience
and informed credit assessment and including forward looking information.

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured
as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company
in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of '' 83,025.86 lakhs (March 31, 2024 : 74,371.35 lakhs), the
exposure considered for expected credit loss is '' 77,712.89 lakhs (March 31, 2024 : '' 70,365.75).
The balance which is not considered for impairment primarily pertains to intercompany receivables
and secured debtors.

iv) Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s
income or the value of its holdings of financial instruments. Market risk is attributable to all market risk
sensitive financial instruments including foreign currency receivables and payables. The Company is
exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is
a function of revenue generating and operating activities in foreign currency. The objective of market risk
management is to avoid excessive exposure in our foreign currency revenues and costs.

Exposure to currency risk

The summary quantitative data about the Company''s unhedged exposure to currency risk as reported to
the management is as follows.

38 LEASES

The Company has taken vehicles, leasehold improvements, data processing equipment, office premises and
warehouse. These leases typically run for a period of eleven months to ninety six months, with an option to renew
the lease after that date. For certain leases, the Company is restricted from entering into any sub-lease arrangements.
Information about leases for which the Company is a lessee is presented below.

39 AMALGAMATION

a) The Boards of Directors of the Company and of 3M E&C, wholly owned subsidiary of the Company at their
Meetings held on September 17, 2021 had approved the Scheme of Amalgamation of 3M E&C with the Company
under Sections 230 to 232 of the Companies Act 2013 read with the Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016. The Scheme of Amalgamation of 3M E&C with the Company was filed with
National Company Law Tribunal (NCLT) to amalgamate the wholly owned subsidiary.

b) 3M E&C was a private limited company domiciled in India with its registered office at Plot Nos. 95-97,
Sanniyasikuppam, Udhaya Nagar, Thirubhuvanai main road, Thirubhuvanai Post, Pondicherry - 605107. 3M
E&C offers a complete range of products that include the Cable jointing kits ranging from 1.1Kv to 132 KV,
Heatshrinks, Coldshrinks, Kastex, Electrical Insulation Tapes, Busbar tubes, DIY Electrical kits, various kinds
of water filters, water softners, Hi flo filters, Wholehouse filters, Zeta . In India, 3M E&C has manufacturing
facility at Pune.

c) Pursuant to the order from NCLT Chennai dated August 25, 2023 and order from NCLT Bengaluru dated August
08, 2024, 3M E&C (the “transferor company”) were merged with the Company with an appointed date as April
01, 2023. The order has been made effective on September 04, 2024 upon complying with all the relevant
requirements under the Companies Act, 2013.

d) The amalgamation has been accounted for under the ‘pooling of interest’ method as prescribed by Appendix C
of Ind AS 103 “Business Combination”. Given that the merger is a common control transaction, the prior year
figures have been restated as if the merger had occurred from the beginning of the preceding period. i.e., April
01, 2023. Prior year numbers have been recasted to include the result of the subsidiary as if the merger had
occurred from the beginning of the preceding period April 01, 2023.

e) Consequent to the scheme of amalgamation, the authorized share capital of the transferor companies stands
cancelled. Further, there was no consideration or exchange of shares on account of this amalgamation as the
subsidiary got subsumed into the Company.

f) The impact of the above merger on the reported balance sheet as at March 31, 2024 on the Company and
the subsidiary while preparing the merged financials are as follows. There is no impact of the merger on the
consolidated financial statements of the Company.

41 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(s) or entity(ies), including foreign entities (“Intermediaries”)
with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party
identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from
any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or
invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries.

42 OTHER STATUTORY INFORMATION:

i) The Company does not have any Benami property or any proceeding is pending against the Company for holding
any Benami property.

ii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies
beyond the statutory period.

iii) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

iv) The Company is not classified as wilful defaulter.

v) The Company doesn’t have any transaction which is not recorded in the books of accounts that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such
as search or survey.

vi) The Company has no transactions with the struck off companies.

vii) The Company has not entered into any scheme of arrangement which has an accounting impact on current or
previous financial year.

for B S R & Co. LLP for and on behalf of 3M India Limited

Chartered Accountants

Firm Registration No: 101248W/W-100022

Umang Banka Ramesh Ramadurai Jayanand Kaginalkar

Partner Managing Director Whole-time Director

Membership No: 223018 DIN: 07109252 DIN: 07904558

Nikhil Arora Pratap Rudra Bhuvanagiri

Chief Financial Officer Company Secretary

Membership No: A22297

Place: Bengaluru Place: Bengaluru

Date: May 28, 2025 Date: May 28, 2025

---

Mar 31, 2024

(m) Provisions and contingent liabilities

i. General

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed. The expense relating to a provision is presented in the Statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

ii. Contingent liabilities

A disclosure for contingent liabilities is made where there is a possible obligation or a present obligation that may probably not require an outflow of resources. When there is a possible or a present obligation where the

likelihood of outflow of resources is remote, no provision or disclosure is made.

iii. Onerous contracts

Provision for onerous contracts. i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.

(n) Leases

The Company has applied Ind AS 116 with effect from April 1, 2019 using the modified retrospective approach. At inception of the contract, the Company determines whether the contract is a lease or contains a lease arrangement. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

As a lessee

The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, in Statement of profit and loss and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the its incremental borrowing rate as the discount rate.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if Company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in statement of profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

The Company presents right-of-use assets that do not meet the definition of investment property separately in the balance sheet and lease liabilities separately within ‘Financial Liabilities’.

Short-term leases and leases of low-value assets The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(o) Segment reporting

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The Managing Director of the Company is responsible for allocating resources and assessing performance of the operating segments and accordingly is identified as the CODM. The Company publishes the standalone financial statements of the Company along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.

(p) Cash and cash equivalents

The Company considers all highly liquid investments, which are readily convertible into known amounts of cash that are subject to an

insignificant risk of change in value to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.

(q) Earnings per share

Basic Earnings Per Share (‘EPS’) is computed by dividing the net profit attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit/ loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(r) Cash flow statement

Cash flows are reported using indirect method, whereby net profits before tax is adjusted for

the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating (operating activities), investing and financing activities of the Company are segregated.

(s) Government grants

The Company recognises an unconditional government grant related to PSI scheme in profit or loss as other income when the grant becomes receivable.

(t) Recent Indian Accounting Standards :

Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to existing standards applicable to the Company.

28 INTER COMPANY AGREEMENTS AND ARRANGEMENTS

a) Intellectual property agreement (Royalty expenses) - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective April 1, 2023. Accordingly, the Company has incurred an expenditure of '' 7,675.99 lakhs for the year ended March 31, 2024 (March 31, 2023: '' 5,744.66 lakhs) and disclosed as Royalty under other expenses (refer note 26).

b) Corporate management fees - In order to avail economies of scale , the Company has entered into inter-company services support services agreement with 3M Global Service Center Management Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2019. The Company is charged with comprehensive support services charges by 3M Global Service Center Management Company for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses and Outsourced Services of Transaction Processing on competitive conditions. Accordingly, the Company has incurred an expenditure of '' 11,843.30 lakhs for the year ended March 31, 2024 (March 31, 2023: '' 11,711.22 lakhs) and disclosed as Corporate management fees under other expenses (refer note 26).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of '' 1,249.60 lakhs (March 31, 2023 : '' 1,457.76 lakhs).

29 EMPLOYEE STOCK OPTION PLAN

A. Description of share based payment arrangements

Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, eligible employees of the Company are entitled to acquire shares of 3M Company, USA via via stock options i.e., stock appreciation rights (SARs) and restricted stock units (RSUs). The eligible employees are granted stock options i.e., stock appreciation rights (SARs) and restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. The exercise price of SARs will be based on the grant letter and RSUs will be Nil. As of the year end a sum of '' 967.42 lakhs (2023: '' 1,314.36 lakhs) is liability and the same is included as ‘Employee benefit obligation’ under Other financial liabilities (refer note 17).

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black - Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA as on March 31, 2024.

30 EMPLOYEE BENEFITS

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF) and Contribution to SF is made to 3M India Ltd Employees Superannuation Fund Trust. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the Statement of profit and loss, which are included in contribution to provident and other funds:

('' in lakhs)

(b) Defined benefit plan

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee’s last drawn salary and years of employment with the Company. The Company contributes all ascertained liabilities towards gratuity to the 3M India Ltd Employees Gratuity Fund Trust. Trustees administer contributions made to the trust. As of March 31, 2024 and March 31, 2023, the plan assets have been primarily invested in insurer managed funds.

Notes:

(i) Income tax matters mainly relate to transfer pricing adjustments made by the Income tax authorities with respect to disallowance of intercompany charges related to corporate management fees.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of ''1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated December 8, 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period December 8, 2011 to February 7, 2014. The Company has received an order in original on October 1, 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for custom duty in show cause notice amounting to ''7,693.52 lakhs, penalty equivalent to the custom duty amount and additional penalty and interest of ''1,000 lakhs. The Company has executed a bank guarantee of '' 1,000 lakhs. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of deposit of ''577 lakhs which is not included in the amount above.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2006-07 to 2017-18. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

(vii) The Goods and service tax matter relates to classification of handrubs for the period July 2017 to March 2021, based on notices received upon GST Audits for year 2017-18 to 2019-20 and transition of credit through TRAN-1 for year 2016-17 and 2017-18.

38 FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT

A. Accounting classification and fair values

a) Fair value through other comprehensive income (FVTOCI) - Where the financial assets are held not only for collection of cash flows arising from payments of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income

b) Fair value through profit or loss (FVTPL) - Where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.

c) Amortised cost - Where the financial assets are held solely for collection of cash flows arising from payments of principal and/or interest.

B. Financial Risk Management

The company has exposure to the following risk arising from financial instruments:

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents and other bank balances that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables.

Expected credit loss assessment for the Company as at March 31, 2023 and 2024.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of '' 71,880.49 lakhs (March 31, 2023: 63,492.65 lakhs), the exposure considered for expected credit loss is '' 66,459.85 lakhs (March 31, 2023: '' 60,532.21). The balance which is not considered for impairment primarily pertains to intercompany receivables and secured debtors.

The following table provides information about the exposure to credit risk and expected credit loss for trade and other receivables -

iii. Liquidity risk

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

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

The table below provides details regarding the contractual maturities of significant financial liabilities:

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

43 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(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

44 OTHER STATUTORY INFORMATION:

i) The Company does not have any Benami property or any proceeding is pending against the Company for holding any Benami property.

ii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.

iii) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

iv) The Company is not classified as wilful defaulter.

v) The Company doesn’t have any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such as search or survey.

vi) The Company has no transactions with the struck off companies.

vii) The Company has complied with the number of layers prescribed under the Companies Act, 2013.

viii) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

45 The Holding Company 3M Company, USA on July 26, 2022 had announced its intent to spin off Health Care business. The Board of Directors in the earlier quarters had approved the proposal of 3M Company, USA for not to spin off the healthcare business of the Company in India and propose it to be operated under a licensed manufacturing, reselling and distributorship arrangements (herein after referred to as “agreements’) . Pursuant to the completion of the planned spin-off of the Healthcare business by 3M Company USA globally into Solventum with effect from April 1, 2024, the Company has entered into the agreements dated March 31, 2024 to conduct the business operation with Solventum and its affiliates.

46 For the year 2023-24, the Board recommended a dividend of '' 685 per equity share (final dividend of '' 160 per equity share and special dividend of '' 525 per equity share) at its meeting held on May 28, 2024. This payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company.

47 SUBSEQUENT EVENTS

There are no material subsequent events after the balance sheet date upto the date of adoption of these financial statements which may have significant impact on these financial statements.

As per our report of even date attached

for B S R & Co. LLP for and on behalf of the Board of Directors

Chartered Accountants

Firm Registration Number: 101248W/W-100022

Umang Banka Ramesh Ramadurai Vidya Sarathy Pratap Rudra Bhuvanagiri

Partner Managing Director Whole-time Director & Company Secretary

Membership No.: 223018 DIN: 07109252 Chief Financial Officer Membership No.: A22297

DIN: 01689378

Place: Bengaluru Place: Bengaluru

Date: May 28, 2024 Date: May 28, 2024

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Mar 31, 2023

Nature and purpose of other equity

(i) Securities premium:

Securities premium reserve is used to record the premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

(ii) General reserve:

General reserve comprises of the reserve generally available to the shareholders of the Company

(iii) Remeasurement of defined benefit plans, net of tax effect:

Differences between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other equity’ and subsequently not reclassified to the Statement of profit and loss and will be reclassified to retained earnings.

(iv) Retained earnings:

The cumulative gain or loss arising from the operations which is retained by the Company is recognised and accumulated under the heading of retained earnings. At the end of the year, the profit after tax is transferred from the Statement of profit and loss to retained earnings.

28 Inter Company agreements and arrangements

a) Intellectual property agreement - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 01, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 01, 2006 to June 30, 2009. These payments have been reinstated with effect from July 01, 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective July 01, 2013. Accordingly, the Company has incurred an expenditure of ''5,744.66 lakhs for the year ended March 31, 2023 (March 31, 2022: ''4,448.16 lakhs) and disclosed as Royalty under other expenses (refer note 26).

b) (i) Support services and corporate management fees - In order to avail economies of scale, the Company

has entered into inter-company services support services agreement with 3M Global Service Center Management Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 01, 2019. The Company is charged with comprehensive support services charges by 3M Global Service Center Management Company for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses and Outsourced Services of Transaction Processing on competitive conditions. This agreement supersedes the agreement entered by the Company with 3M Company, USA dated April 01, 2009, 3M Asia Pacific Pte Limited dated January 1, 2003 and 3M Hong Kong Ltd with effect from January 1, 2011.

The Company has accrued an amount of ''3,022.15 lakhs (March 31, 2022 : ''2,301.53 lakhs) in respect of estimated liability for the above services during period January 1, 2023 to March 31, 2023, the actual liability would be ascertained by December 2023. The balance is included in Trade payables, refer note 16.

(ii) The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates. Accordingly the Company has recharged ''600.45 lakhs (March 31, 2022 : ''375.98 lakhs).

(iii) The support service agreement enables the Company to invoice expenses relating to management support fee to 3M Company and its affiliates. During the year, the Company has recognised an income of ''3,003.15 lakhs (March 31, 2022 : ''4,649.75 lakhs).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative

Properties Company and 3M Company, USA effective July 01, 2006 for carrying out contract research activities.

During the year, Company has recognized an income of ''1,457.76 lakhs (March 31, 2022 : ''1,610.75 lakhs).

29 Employee stock option plan

A. Description of share based payment arrangements

i) Share purchase plan (equity-settled)

3M Company, USA, the parent Company has offered ‘General Employees Stock Purchase Plan’ to all the employees of the Company, under which the employees of the Company are eligible to purchase the shares of 3M Company, USA at 85% of the market price of the share. Under the plan, the Company deducts the amount from the monthly salary of the employees and remits the amount to 3M Company, USA. In accordance with the plan, the Company during the year has deducted for remittance a sum of ''415.81 lakhs (2022: ''409.89 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of ''27.51 lakhs (2022: ''38.55 lakhs) is pending remittance to the holding Company and the same is included under ‘Other financial liabilities’ (refer note 17).

ii) Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, Executive Directors and Senior Executives of the Company are eligible to acquire shares of 3M Company, USA via stock options i.e., stock appreciation rights (SARs) and restricted stock units (RSUs). The eligible employees are granted stock options i.e., stock appreciation rights (SARs) and restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. The exercise price of SARs will be based on the grant letter and RSUs will be Nil. As of the year end a sum of ''1,314.36 lakhs (2022: ''1,307.91 lakhs) is liability and the same is included under ‘Other financial liabilities’ (refer note 17).

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black - Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA as on March 31, 2023.

D. Expense recognised in Statement of profit and loss

An amount of ''703.87 lakhs has been debited (March 31, 2022: ''129.42 lakhs has been credited) to the Statement of profit and loss for the year and included under Employee benefit expenses.

E. The weighted average share price at the date of exercise with regards to SARs and RSUs exercised during the year is USD 126.25 and USD 117.89 respectively (March 31, 2022: USD 165.13 and USD 160.73 respectively)

The above disclosures have been made to the extent information is available with the Company.

30 Employee benefits

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF), Employees’ State Insurance (ESI). Contribution to SF is made to 3M India Ltd Employees Superannuation Fund Trust. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

1. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of '' Nil (March 31, 2023: '' Nil) is expected to be paid to the plans during the year ending March 31, 2024.

The Compensated absences are unfunded defined benefit obligation. Refer note-14 of the financial statements

for the current and non current obligations.

32 Segment Reporting

In accordance with Ind AS 108 ‘Operating segments’, segment information are included in the consolidated financial statement of the Company and therefore no separate disclosure on segment information has been given in these standalone financial statement.

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of ''1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated December 08, 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period December 08, 2011 to 7 February 2014. The Company has received an order in original on October 01, 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for custom duty in show cause notice amounting to ''7,693.52 lakhs, penalty equivalent to the custom duty amount and additional penalty and interest of ''1,000 lakhs. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of mandatory deposit of ''577 lakhs which is not included in the amount above.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2005-06 to 2017-18. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

(vii) The Supreme court of India in the month of February 2019 had passed a judgement relating to definition of wages under the Provident Fund Act, 1952. However, considering that there are numerous interpretative issues relating to this judgement and in the absence of reliable measurement of the provision for the earlier periods, the Company has made a provision for provident fund contribution pursuant to the judgement in the previous year. The Company will evaluate its position and update its provision, if required, on receiving further clarity on the subject. The Company does not expect any material impact of the same.

37 Capital management

The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.

For the purpose of debt to total equity ratio, debt is debt as considered under long-term, short-term borrowings and lease liabilities. Total equity comprise of issued share capital and all other equity reserves.

38 Financial Instruments - Fair values and risk management A. Accounting classification and fair values

a) Fair value through other comprehensive income (FVTOCI) - Where the financial assets are held not only for collection of cash flows arising from payments of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income

b) Fair value through profit or loss (FVTPL) - Where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.

c) Amortised cost - Where the financial assets are held solely for collection of cash flows arising from payments of principal and/or interest.

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables.

Expected credit loss assessment for the Company as at March 31, 2022 and 2023.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whetherthe credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).”

Out of the total trade receivables of ''63,492.65 lakhs (March 31, 2022: 52,787.92 lakhs), the exposure considered for expected credit loss is ''60,532.21 lakhs (March 31, 2022: ''51,666.35). The balance which is not considered for impairment primarily pertains to intercompany receivables and secured debtors.

iii. Liquidity risk

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

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

The Company during the year incurred ''150.63 lakhs (March 31, 2022: ''279.44) towards expenses relating to lease of low-value assets and short termed leases respectively.

The total cash outflow for leases during the year is 2,444.64 lakhs (including interest of ''177.03 lakhs) [March 31, 2022: ''2,106.08 lakhs (including interest of ''200.47 lakhs)].

The incremental borrowing rate on the previously considered operating leases is 9%.

41 The Boards of Directors of the Company and of 3M Electro & Communication India Private Limited (3M E&C), wholly owned subsidiary of the Company at their Meetings held on September 17, 2021 had approved the Scheme of Amalgamation of 3M E&C with the Company under Sections 230 to 232 of the Companies Act. 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Appointed Date fixed under the Scheme is April 01, 2021. The Scheme of Amalgamation of 3M E&C with the Company has been filed with National Company Law Tribunal (NCLT) to amalgamate the wholly owned subsidiary. NCLT Chennai vide its order dated May 25, 2022 has dispensed with convening of the meeting of Equity Shareholders and the Creditors of 3M E&C. The Company and 3M E&C has filed the necessary applications to seek the approval for merger as per NCLT directions and the approval order is awaited.

43 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(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

44 Other statutory information:

i) The Company does not have any Benami property or any proceeding is pending against the Company for holding any Benami property.

ii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.

iii) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

iv) The Company is not classified as wilful defaulter.

v) The Company doesn’t have any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such as search or survey.

vi) The Company has no transactions with the struck off companies.

45 The Holding Company 3M Company, USA on July 26, 2022 has announced its intent to spin off Health Care business. There are no accounting and disclosure consequences in the financial results for the quarter ended March 31, 2023 since the conditions prescribed under the relevant Ind AS is not fulfilled. Also refer the segment information for Health Care business related assets and liabilities.

46 Company’s books of accounts and other relevant books and papers (“Books and papers”) are maintained in electronic mode and accessible all time in India. In compliance with Rule 3 of Companies (Accounts) Rules, 2014, the Company had identified the composition of books and papers and broadly classified into primary (Core ERP) and secondary (workflow applications) book and papers. The back-up of books and papers in electronic mode were periodically maintained in servers physically located in India. In addition, Company maintains back-up of books and papers on daily basis in servers physically located outside India. During the year, the Company initiated actions in phased manner to maintain daily back-up of books and papers in servers physically located in India. Accordingly, from December 2022, the Company started manually maintaining daily back-ups for primary books and papers (Core ERP) in the servers physically located in India by taking a copy of the global backup into servers physically located in India. As at March 31, 2023, the Company is in the process of implementing automated maintenance of daily back-up in a server physically located in India for primary and secondary books and papers, as well as testing the restoration of the backups.

47 For the year 2022-23, the Board recommended a final dividend of ''100.00/- (per equity share) at its meeting held on 30 May 2023. This payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company.

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Mar 31, 2022

The provision for write down of inventories to net realisable value during the year amounted to Rs. 364.24 lakhs (31 March 2021 : Rs 814.22 lakhs). The provision estimated by the management for obsolete stock during the year amounted to Rs. 1,895.02 lakhs (31 March 2021 : Rs. 2,001.79 lakhs). The write down, reversal and provision for obsolete stock are included in the costs of materials consumed or changes in inventories of finished goods and work-in-progress.

Rights, preferences and restrictions attached to the equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share held. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the 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.

Nature and purpose of other equity

(i) Securities premium reserve:

Securities premium reserve is used to record the premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

(ii) General reserve:

General reserve comprises of the reserve generally available to the shareholders of the Company

(iii) Other comprehensive income:

Differences between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other equity’ and subsequently not reclassified to the Statement of profit and loss and will be reclassified to retained earnings.

(iv) Retained earnings:

The cumulative gain or loss arising from the operations which is retained by the Company is recognised and accumulated under the heading of retained earnings. At the end of the year, the profit after tax is transferred from the Statement of profit and loss to retained earnings.

28 Inter Company agreements and arrangements

a) Intellectual property agreement - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from 1 July 2006 to 30 June 2009. These payments have been reinstated with effect from 1 July 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective 1 July 2013. Accordingly, the Company has incurred an expenditure of Rs. 4,448.16 lakhs for the year ended 31 March 2022 (31 March 2021: Rs. 2,969.87 lakhs) and disclosed as Royalty under other expenses (refer note 26).

b) (i) Support services and corporate management fees - In order to avail economies of scale , the Company

has entered into inter-company services support services agreement with 3M Global Service Center Management Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from 1 April 2019. The Company is charged with comprehensive support services charges by 3M Global Service Center Management Company for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses and Outsourced Services of Transaction Processing on competitive conditions. This agreement supersedes the agreement entered by the Company with 3M Company, USA dated 1 April 2009,3M Asia Pacific Pte Limited dated 1 January 2003 and 3M Hong Kong Ltd with effect from 1 January 2011.

The Company has accrued an amount of Rs. 2,301.53 lakhs (31 March 2021 : Rs. 2,874.34 lakhs) in respect of estimated liability for the above services during period 1 January 2022 to 31 March 2022, the actual liability would be ascertained by December 2022.

(ii) The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates. Accordingly the Company has recharged Rs. 375.98 lakhs (31 March 2021 : Rs. 750.38 lakhs).

(iii) The support service agreement enables the Company to invoice expenses relating to management support fee to 3M Company and its affiliates. During the year, the Company has recognised an income of Rs. 4,649.75 lakhs (31 March 2021 : Rs. 2,092.42 lakhs).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,610.75 lakhs (31 March 2021 : Rs. 1,345.01 lakhs).

29 Employee stock option planA. Description of share based payment arrangements

i) Share purchase plan (equity-settled)

3M Company, USA, the parent Company has offered ‘General Employees Stock Purchase Plan’ to all the employees of the Company, under which the employees of the Company are eligible to purchase the shares of 3M Company, USA at 85% of the market price of the share. Under the plan, the Company deducts the amount from the monthly salary of the employees and remits the amount to 3M Company, USA. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 409.89 lakhs (2021: Rs. 336.40 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 38.55 lakhs (2021: Rs. 24.98 lakhs) is pending remittance to the holding Company and the same is included under ‘Other financial liabilities’ (refer note 17).

ii) Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, Executive Directors and Senior Executives of the Company are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs) / restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. The exercise price of SARs will be based on the grant letter and RSUs will be Nil. As of the year end a sum of Rs. 1,307.91 lakhs (2021: Rs. 2,220.61 lakhs) is liability and the same is included under ‘Other financial liabilities’ (refer note 17).

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black - Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA as on 31 March 2022.

The expected term of the SARs is estimated based on the vesting term and contractual term of the SARs, as well as expected exercise behaviour of the employee who receives the SAR. Expected volatility during the expected term is based on historical volatility of the observed market prices of the 3M Company USA’s publicly traded equity shares particularly over the historical period commensurate with the expected term.

D. Expense recognised in Statement of profit and loss

An amount of Rs. 129.42 lakhs has been credited (31 March 2021: Rs. 1,230.66 lakhs has been debited) to the Statement of profit and loss for the year and included under Employee benefit expenses.

E. The weighted average share price at the date of exercise with regards to SARs and RSUs exercised during the year is USD 165.13 and USD 160.73 respectively (31 March 2021: USD 167.13 and USD 181.05 respectively) The above disclosures have been made to the extent information is available with the Company.

30 Employee benefits

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF), Employees’ State Insurance (ESI). Contribution to SF is made to 3M India Ltd Employees Superannuation Fund Trust. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the Statement of profit and loss, which are included in contribution to provident and other funds:

(b) Defined benefit plan

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee’s last drawn salary and years of employment with the Company. The Company contributes all ascertained liabilities towards gratuity to the 3M India Ltd Employees Gratuity Fund Trust. Trustees administer contributions made to the trust. As of 31 March 2022 and 31 March 2021, the plan assets have been primarily invested in insurer managed funds.

1. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2022: Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2023.

The Compensated absences are unfunded defined benefit obligation. Refer note-14 of the financial statements for

the current and non current obligations.

32 Segment Reporting

In accordance with Ind AS 108 ‘Operating segments’, segment information are included in the consolidated financial statement of the Company and therefore no separate disclosure on segment information has been given in these standalone financial statement.

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated 8 December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period 8 December 2011 to 7 February 2014. The Company has received an order in original on 1 October 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for custom duty in show cause notice amounting to Rs.7,693.52 lakhs, penalty equivalent to the custom duty amount and additional penalty and interest of Rs.1,000 lakhs. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of mandatory deposit of Rs.577 lakhs which is not included in the amount above.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2003-04 to 2017-18. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

(vii) The Supreme court of India in the month of February 2019 had passed a judgement relating to definition of wages under the Provident Fund Act, 1952. However, considering that there are numerous interpretative issues relating to this judgement and in the absence of reliable measurement of the provision for the earlier periods, the Company has made a provision for provident fund contribution pursuant to the judgement in the previous year. The Company will evaluate its position and update its provision, if required, on receiving further clarity on the subject. The Company does not expect any material impact of the same.

Capital management

The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.

For the purpose of debt to total equity ratio, debt is debt as considered under long-term, short-term borrowings and lease liabilities. Total equity comprise of issued share capital and all other equity reserves.

38 Financial Instruments - Fair values and risk management

A. Accounting classification and fair values

a) Fair value through other comprehensive income (FVTOCI) - Where the financial assets are held not only for collection of cash flows arising from payments of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income.

b) Fair value through profit or loss (FVTPL) - Where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.

c) Amortised cost - Where the financial assets are held solely for collection of cash flows arising from payments of principal and/or interest.

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the short-term nature of these instruments.

B. Financial Risk Management

The Company has exposure to the following risk arising from financial instruments:

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables.

Expected credit loss assessment for the Company as at 31 March 2021 and 2022.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 52,787.92 lakhs (31 March 2021: 50,450.74 lakhs), the exposure considered for expected credit loss is Rs. 51,666.35 lakhs (31 March 2021: Rs. 49,037.13). The balance which is not considered for impairment primarily pertains to intercompany receivables and secured debtors.

iii. Liquidity risk

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

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US Dollar or Euro against all other currencies as at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Impact of Covid 19 pandemic:

The Company has considered internal and external sources of information as of the date of approval of the financial results in determining the possible impact, if any, of the resurgence of the COVID-19 pandemic on the carrying amounts of its trade receivables, inventories, financial and non-financial assets. The Company has used the principle of prudence in applying judgements and making estimates. Based on this evaluation, the Company does not expect any material impact on its financial results. However, the eventual outcome of impact of Covid-19 pandemic may be different from those estimated as on the date of approval of these financial statements.

The Company during the year incurred Rs. 279.44 lakhs (31 March 2021: Rs. 195.07) towards expenses relating to lease of low-value assets and short termed leases respectively.

The total cash outflow for leases during the year is Rs. 2,106.08 lakhs (including interest of Rs. 200.47 lakhs) [March 31,2021: Rs. 2,476.50 Lakhs (including interest of Rs, 243.22 lakhs)].

The Boards of Directors of the Company and of 3M Electro & Communication India Private Limited (3M E&C), wholly owned subsidiary of the Company at their Meetings held on 17 September 2021 had approved the Scheme of Amalgamation of 3M E&C with the Company under Sections 230 to 232 of the Companies Act. 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Appointed Date fixed under the Scheme was April 01, 2021. The Scheme of Amalgamation of 3M E&C with the Company has been filed with National Company Law Tribunal (NCLT) to amalgamate the wholly owned subsidiary. NCLT Chennai vide its order dated May 25, 2022 has dispensed with convening of the meeting of Equity Shareholders and the Creditors of 3M E&C. 3M E&C will be initiating next steps and filing necessary applications in accordance with the directions of the NCLT. As on the date of approval of these standalone financial statements, the matter is pending with NCLT. Accordingly, no effect has been given to the aforesaid scheme as at 31 March 2022.

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(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

Other statutory information:

i) The Company does not have any Benami property or any proceeding is pending against the Company for holding any Benami property.

ii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.

iii) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

iv) The Company is not classified as wilful defaulter.

v) The Company doesn’t have any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 such as search or survey.

vi) The Company has no transactions with the struck off companies.

Mr. V. Srinivasan, Company Secretary and Compliance Officer, (Key Managerial Personnel of the Company)

resigned as Company Secretary and Compliance Officer from the closing hours of May 10, 2022 and the Company

is taking steps to appoint a Company Secretary. As on the date of approval of these financial statements by the

Board, the Company Secretary is not appointed.

---

Mar 31, 2021

Nature and purpose of other equity

(i) Securities premium reserve:

Securities premium reserve is used to record the premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

(ii) General reserve:

General reserve comprises of the reserve generally available to the shareholders of the Company

(iii) Other comprehensive income:

Differences between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other equity’ and subsequently not reclassified to the Statement of profit and loss and will be reclassified to retained earnings.

(iv) Retained earnings:

The cumulative gain or loss arising from the operations which is retained by the Company is recognised and accumulated under the heading of retained earnings. At the end of the year, the profit after tax is transferred from the Statement of profit and loss to retained earnings.

28 Inter Company agreements and arrangements

a) Intellectual property agreement - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from 1 July 2006 to 30 June 2009. These payments have been reinstated with effect from 1 July 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective 1 July 2013. Accordingly, the Company has incurred an expenditure of Rs. 2,969.87 lakhs for the year ended 31 March 2021 (31 March 2020: Rs. 3,820.22 lakhs) and disclosed as Royalty under other expenses (refer note 26).

b) (i) Support services and corporate management fees - In order to avail economies of scale , the Company

has entered into inter-company services support services agreement with 3M Global Service Center Management Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from 1 April 2019. The Company is charged with comprehensive support services charges by 3M Global Service Center Management Company for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses and Outsourced Services of Transaction Processing on competitive conditions. This agreement supersedes the agreement entered by the Company with 3M Company, USA dated 1 April 2009,3M Asia Pacific Pte Limited dated 1 January 2003 and 3M Hong Kong Ltd with effect from 1 January 2011.

The Company has accrued an amount of Rs. 2,874.34 lakhs (31 March 2020 : Rs. 3,170.43 lakhs) in respect of estimated liability for the above services during period 1 January 2021 to 31 March 2021, the actual liability would be ascertained by December 2021.

(ii) The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates. Accordingly the Company has recharged Rs. 750.38 lakhs (31 March 2020 : Rs. 1,382.29 lakhs).

(iii) The support service agreement enables the Company to invoice expenses relating to management support fee to 3M Company and its affiliates. During the year, the Company has recognised an income of Rs. 2,092.42 lakhs (31 March 2020 : Rs. 1,142.40 lakhs).

c) Contract research agreement - Contract research agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,345.01 lakhs (31 March 2020 : Rs. 1,984.76 lakhs).

29 Employee stock option planA. Description of share based payment arrangements

i) Share purchase plan (equity-settled)

3M Company, USA, the parent Company has offered ‘General Employees Stock Purchase Plan’ to all the employees of the Company, under which the employees of the Company are eligible to purchase the shares of 3M Company, USA at 85% of the market price of the share. Under the plan, the Company deducts the amount from the monthly salary of the employees and remits the amount to 3M Company, USA. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 336.40 lakhs (2020: Rs. 327.47 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 24.98 lakhs (2020: Rs. 28.77 lakhs) is pending remittance to the holding Company and the same is included under ‘Other financial liabilities’ (refer note 17).

ii) Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, Executive Directors and Senior Executives of the Company are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs) / restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. Exercise price of SARs and RSUs will be Nil. As of the year end a sum of Rs. 2,220.61 lakhs (2020: Rs. 900.21 lakhs) is liability and the same is included under ‘Other financial liabilities’ (refer note 17).

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black - Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA as on 31 March 2021.

D. Expense recognised in Statement of profit and loss

An amount of Rs. 1,230.66 lakhs has been debited (31 March 2020: Rs. 573.47 lakhs has been credited) to the Statement of profit and loss for the year and included under Employee benefit expenses.

E. The weighted average share price at the date of exercise with regards to SARs and RSUs exercised during the year is USD 167.13 and USD 181.05 respectively.

The above disclosures have been made to the extent information is available with the Company.

30 Employee benefits

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF), Employees’ State Insurance (ESI). Contribution to SF is made to 3M India Ltd Employees Superannuation Fund Trust. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the Statement of profit and loss, which are included in contribution to provident and other funds:

(b) Defined benefit plan

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee’s last drawn salary and years of employment with the Company. The Company contributes all ascertained liabilities towards gratuity to the 3M India Ltd Employees Gratuity Fund Trust. Trustees administer contributions made to the trust. As of 31 March 2021 and 31 March 2020, the plan assets have been primarily invested in insurer managed funds.

1. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2021: Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2022.

32 Segment Reporting

In accordance with Ind AS 108 ‘Operating segments’, segment information are included in the consolidated financial statement of the Company and therefore no separate disclosure on segment information has been given in these standalone financial statement.

33 Corporate social responsibility

During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs. 865.03 lakhs (31 March 2020: Rs. 897.57 lakhs) in accordance with Section 135 of the Companies Act, 2013. The following amounts were spent during the current and previous year:

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated 8 December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period 8 December 2011 to 7 February 2014. The Company has received an order in original on 1 October 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for custom duty in show cause notice amounting to Rs.7,693.52 lakhs, penalty equivalent to the custom duty amount and additional penalty and interest of Rs.1,000 lakhs. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of mandatory deposit of Rs.577 lakhs which is not included in the amount above.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2003-04 to 2017-18. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

(vii) The Supreme court of India in the month of February 2019 had passed a judgement relating to definition of wages under the Provident Fund Act, 1952. However, considering that there are numerous interpretative issues relating to this judgement and in the absence of reliable measurement of the provision for the earlier periods, the Company has made a provision for provident fund contribution pursuant to the judgement in the previous year. The Company will evaluate its position and update its provision, if required, on receiving further clarity on the subject. The Company does not expect any material impact of the same.

37 Capital management

The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.

For the purpose of debt to total equity ratio, debt is debt as considered under long-term, short-term borrowings and lease liabilities. Total equity comprise of issued share capital and all other equity reserves.

The capital structure as of 31 March 2021 and 31 March 2020 was as follows -

38 Financial Instruments - Fair values and risk management

A. Accounting classification and fair values

a) Fair value through other comprehensive income (FVTOCI) - Where the financial assets are held not only for collection of cash flows arising from payments of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income

b) Fair value through profit or loss (FVTPL) - Where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.

c) Amortised cost - Where the financial assets are held solely for collection of cash flows arising from payments of principal and/or interest.

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables.

Expected credit loss assessment for the Company as at 31 March 2020 and 2021.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that

is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 50,450.74 lakhs (31 March 2020: 55,492.19 lakhs), the exposure considered for expected credit loss is Rs. 49,037.13 lakhs (31 March 2020 :Rs. 52,212.41). The balance which is not considered for impairment primarily pertains to intercompany receivables and secured debtors.

The following table provides information about the exposure to credit risk and expected credit loss for trade and other receivables:

iii. Liquidity risk

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

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iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Exposure to currency risk

The summary quantitative data about the Company’s unhedged exposure to currency risk as reported to the management is as follows.

The Company has considered internal and external sources of information as of the date of approval of the financial results in determining the possible impact, if any, of the resurgence of the COVID-19 pandemic on the carrying amounts of its trade receivables, inventories, financial and non-financial assets. The Company has used the principle of prudence in applying judgements and making estimates. Based on this evaluation, the Company does not expect any material impact on its financial results. However, the eventual outcome of impact of Covid-19 pandemic may be different from those estimated as on the date of approval of these financial statements.

During the year ended 31 March 2020, based on the assessment the Company recorded an impairment of Rs. 7,990 lakhs, given the impact of the COVID -19 pandemic on the current and future operations of the subsidiary, which is included in other expenses.

39 Leases

The Company has taken vehicles, leasehold improvements, data processing equipment, office premises, warehouse and residential premises. These leases typically run for a period of eleven months to ninety six months, with an option to renew the lease after that date. For certain leases, the Company is restricted from entering into any sub-lease arrangements. Information about leases for which the Company is a lessee is presented below.

41 The Board of Directors of the Company and 3M Electro & Communication India Private Limited (3M E&C), at their Meetings held on 13 November 2019 had approved the Scheme of Amalgamation (‘the Scheme’) of 3M E&C (‘Transferor Company’) with the Company under Section 233 of the Companies Act, 2013. The Appointed Date fixed under the Scheme was 1 April 2019. The Company sought approvals from Members and Creditors under Section 233(1)(b) of the Companies Act, 2013 by Special Resolutions through Postal Ballot notice dated 21 January 2020. The results of the voting by Postal Ballot were announced on 28 February 2020. Based on the opinion from the counsel, the Company has now made an application with the jurisdictional Regional Director for the approval of the Scheme. Additional information sought by the Regional Director has been submitted and the Company awaits further information from the Regional Director. Accordingly, no effect has been given to the aforesaid scheme as at 31 March 2021.

42 The disclosures regarding details of specified bank notes held and transacted during 8 November 2016 to 30 December 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended 2021.

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Mar 31, 2019

1. Reporting entity

3M India Limited (‘the Company’) is a subsidiary of 3M Company, USA. The Company manages its operations in five operating segments: Industrial, Health Care, Safety and Graphics, Consumer and Energy. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore. 3M India’s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company domiciled in India with its registered office situated at Plot Nos. 4851, Electronic City, Hosur Road, Bengaluru - 560 100 and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

2. Basis of preparation

A. Statement of compliance

These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015, as amended notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act.

The financial statements were authorised for issue by the Company’s Board of Directors on 28 May 2019.

Details of the Company’s significant accounting policies are included in Note 3.

B. Functional & presentation currency

These financial statements are presented in Indian Rupees (Rs.), which is also the Company’s functional currency. All amounts have been rounded-off to two decimal places to the nearest lakhs, unless otherwise indicated.

C. Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items:

D. Use of estimates and judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgments

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

- Note 28 - leases: whether an arrangement contains a lease; and

- Note 28 - lease classification;

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2020 is included in the following notes:

- Note 4 and 5 - useful life of property, plant and equipment and intangible assets;

- Note 7 to 9 and 40 - impairment of financial assets;

- Note 32 - measurement of defined benefit obligations: key actuarial assumptions;

- Note 36 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources; and

- Note 37 - recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used.

E. Measurement of fair values

Certain accounting policies and disclosures of the Company require the measurement of fair values, for both financial and non financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into a different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Further information about the assumptions made in the measuring fair values is included in the following notes:

- Note 31 - share-based payment arrangements and

- Note 40 - financial instruments

(A) Rights, preferences and restrictions attached to the equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share held. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the 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.

(B) There has been no buyback of shares, issues of shares by way of bonus shares or issue of shares pursuant to contract without payment being received in cash for the period of five years immediately preceeding the date of the balance sheet.

Nature and purpose of other equity

(i) Securities premium reserve

Securities premium reserve is used to record the premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

(ii) General reserve

General reserve comprises of the reserve generally available to the shareholders of the Company.

(iii) Retained earnings:

The cumulative gain or loss arising from the operations which is retained by the Company is recognised and accumulated under the heading of retained earnings. At the end of the year, the profit after tax is transferred from the statement of profit and loss to retained earnings.

(iv) Other comprehensive income:

Differences between the interest income on plan assets and the return actually achieved, and any changes in the liabilities over the year due to changes in actuarial assumptions or experience adjustments within the plans, are recognised in ‘Other equity’ and subsequently not reclassified to the Statement of Profit and Loss and will be reclassified to retained earnings.

Note: Rate of interest for finance lease obligations ranges from 3.40% to 13.90% per annum. Finance lease obligations are secured by hypothecation of assets underlying the leases. Finance lease obligations are payable on monthly / quarterly payment of equated monthly installments beginning from the month subsequent to taking the lease. Period of maturity for the lease obligations of vehicles is 4 years and for equipments it ranges from 2 years to 5 years. Also refer note 28(a).

While disclosing the aggregate amount of transaction price yet to be recognised as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognize those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving event based contracts.

3 (a) Finance lease obligations

The Company has taken vehicles, leasehold improvements and data processing equipment under finance lease agreements. The minimum lease rental payments under the finance leases are as under:

(b) Operating leases

A. Leases as lessee

The Company has taken office premises, warehouse and residential premises under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months.

i. Future minimum lease payments

At 31 March, the future minimum lease payments to be made under non-cancellable operating leases are as follows:

4 Inter Company agreements and arrangements

a) Intellectual property agreement - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from 1 July 2006 to 30 June 2009. These payments have been reinstated with effect from 1 July 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective 1 July 2013. Accordingly, the Company has incurred an expenditure of Rs. 5,096.23 lakhs for the year ended 31 March 2019 (31 March 2018: Rs. 3,078.73 lakhs).

b)(i) Support services and corporate management fees - The Company has entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from 1 April 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated 1 January 2003 which was terminated on 31 March 2009.

The Company has also entered into support services agreement with 3M Hong Kong Ltd with effect from 1 January 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated 1 April 2009.

The Company has accrued an amount of Rs. 3,445.19 lakhs (31 March 2018 : Rs.2,948.75 lakhs) in respect of estimated liability for the above services during period 1 January 2019 to 31 March 2019, the actual liability would be ascertained by December 2019.

(ii) The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates. Accordingly the Company has charged Rs. 1,442.94 lakhs (31 March 2018: Rs. 1,476.51 lakhs).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 2,658.91 lakhs (31 March 2018 : Rs. 2,320.80 lakhs).

5 Employee stock option plan

A. Description of share based payment arrangements

i) Share purchase plan (equity-settled)

3M Company, USA, the parent Company has offered ‘General Employees Stock Purchase Plan’ to all the employees of the Company, under which the employees of the Company are eligible to purchase the shares of 3M Company, USA at 85% of the market price of the share. Under the plan, the Company deducts the amount from the monthly salary of the employees and remits the amount to 3M Company, USA. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 319.96 lakhs (2018: Rs. 262.13 lakhs) and cumulatively amounting to Rs. 1,313.06 lakhs (2018: Rs. 993.10 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 32.17 lakhs (2018: Rs. 30.88 lakhs) is pending remittance to the holding Company and the same is included under ‘Other financial liabilities’ (refer note 18).

ii) Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, Executive Directors and Senior Executives of the Company are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs) / restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. Exercise price of SARs and RSUs will be Nil. As of the year end a sum of Rs. 3,644.91 lakhs (2018: Rs. 4,160.73 lakhs) is liability and the same is included under ‘Other financial liabilities’ (refer note 18).

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black -Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA on the date of the grant.

The fair value of the cash settled SARs and the inputs used in the measurement of fair value at grant date and measurement date of the SARs are as follows:

The expected term of the SARs is estimated based on the vesting term and contractual term of the SARs, as well as expected exercise behaviour of the employee who receives the SAR. Expected volatility during the expected term is based on historical volatility of the observed market prices of the 3M Company USA’s publicly traded equity shares particularly over the historical period commensurate with the expected term.

D. Expense recognised in Statement of profit and loss

An amount of Rs. 341.44 lakhs (31 March 2018: Rs. 2,795.19 lakhs) has been debited to the Statement of profit and loss for the year and included under Employee benefits expense.

E. The weighted average share price at the date of exercise with regards to SARs and RSUs exercised during the year is USD 203.81 and USD 199.23 respectively.

The above disclosures have been made to the extent information is available with the Company.

6 Employee benefits

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF), Employees’ State Insurance (ESI). Contribution to SF is made to 3M India Superannuation Fund. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

(b) Defined benefit plan

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee’s last drawn salary and years of employment with the Company. The Company contributes all ascertained liabilities towards gratuity to the 3M India Limited Employees Gratuity Fund Trust. Trustees administer contributions made to the trust. As of 31 March 2019 and 31 March 2018, the plan assets have been primarily invested in insurer managed funds.

Notes :

1. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2018 : Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2020.

7 Segment Reporting

In accordance with Ind AS 108 ‘Operating segments’, segment information are included in the consolidated financial statement of the Company and therefore no separate disclosure on segment information has been given in these standalone financial statements.

8 Corporate social responsibility

During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs. 768.00 lakhs (31 March 2018: Rs. 557.92 lakhs) in accordance with Section 135 of the Companies Act, 2013. The following amounts were spent during the current and previous year:

9 Contingent liabilities and commitments:

Notes:

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated 8th December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period 8th December 2011 to 7th February 2014. The Company has received an order in original on 1st October 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised for customs duty in show cause notice to the tune of Rs.7,693.52 lakhs along with penalty equivalent to the customs duty amount and additional penalty and interest of Rs.1,000 lakhs. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of mandatory deposit of Rs.577 lakhs.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2005-06 to 2013-14. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

(vii) The Supreme court of India in the month of February 2019 had passed a judgement relating to definition of wages under the Provident Fund Act, 1952. However, considering that there are numerous interpretative issues relating to this judgement and in the absence of reliable measurement of the provision for the earlier periods, the Company has made a provision for provident fund contribution pursuant to the judgement only for the current year. The Company will evaluate its position and update its provision, if required, on receiving further clarity on the subject. The Company does not expect any material impact of the same.

10 Capital management

The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.

For the purpose of debt to total equity ratio, debt is debt as considered under long-term and short-term borrowings which is on account of finance lease on office equipment and vehicles. Total equity comprise of issued share capital and all other equity reserves.

The capital structure as of 31 March 2019 and 31 March 2018 was as follows:

11 Financial Instruments - Fair values and risk management

A. Accounting classification and fair values

The following table shows the carrying amounts of financial assets and financial liabilities as at 31 March 2019

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the short-term nature of these instruments.

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the short-term nature of these instruments.

B. Financial Risk Management

The Company has exposure to the following risk arising from financial instruments

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade receivables.

Expected credit loss assessment for the Company as 31 March 2018 and 2019.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information. Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 58,492.58 lakhs (31 March 2018: 55,976.46 lakhs), the exposure considered for expected credit loss is Rs. 54,553.13 lakhs (31 March 2018 :Rs. 54,538.37). The balance which is not considered for impairment pertains to intercompany receivables and secured debtors.

The following table provides information about the exposure to credit risk and expected credit loss for trade and other receivables:

iii. Liquidity risk

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

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US Dollar or Euro or SGD against all other currencies as at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

12 The disclosures regarding details of specified bank notes held and transacted during 8 November 2016 to 30 December 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended 2019.

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Mar 31, 2018

1. Reporting entity

3M India Limited (‘the Company’) is a subsidiary of 3M Company, USA. The Company manages its operations in five operating segments: Industrial, Health Care, Safety and Graphics, Consumer and Energy. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore. 3M India’s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company domiciled in India with its registered office situated at Plot Nos. 48-51, Electronic City, Hosur Road, Bengaluru - 560 100 and is listed on the BSE Ltd and the National Stock Exchange Ltd (NSE).

2. Basis of preparation

A. Statement of compliance

These financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015, as amended notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act

The financial statements were authorised for issue by the Company’s Board of Directors on 30 May 2018.

Details of the Company’s significant accounting policies are included in Note 3.

B. Functional & presentation currency

These financial statements are presented in Indian Rupees (Rs.), which is also the Company’s functional currency. All amounts have been rounded-off to two decimal places to the nearest lakhs, unless otherwise indicated.

C. Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items:

D. Use of estimates and judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Judgments

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

- Note 27 - leases: whether an arrangement contains a lease; and

- Note 27 - lease classification;

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 March 2017 is included in the following notes:

- Note 4 and 5 - useful life of property, plant and equipment and intangible assets;

- Note 6 to 8 and 39 - impairment of financial assets;

- Note 31 - measurement of defined benefit obligations: key actuarial assumptions;

- Note 35 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources; and

- Note 36 - recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used.

E. Measurement of fair values

Certain accounting policies and disclosures of the Company require the measurement of fair values, for both financial and non financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into a different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Further information about the assumptions made in the measuring fair values is included in the following notes:

- Note 30 - share-based payment arrangements and

- Note 39 - financial instruments

The write down of inventories to net realisable value during the year amounted to Rs. 188.92 lakhs (31 March 2017 : Rs 220.20 lakhs). The provision estimated by the management for obsolete stock during the year amounted to Rs. 770.32 lakhs (31 March 2017 : Rs. 725.34 lakhs). The write down, reversal and provision for obsolete stock are included in the costs of materials consumed or changes in inventories of finished goods and work-in-progress.

(b) Rights, preferences and restrictions attached to the equity shares

The Company has only one class of shares referred to as equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share held. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the 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.

Note: (a) Rate of interest for finance lease obligations ranges from 3.40% to 13.90% per annum. Finance lease obligations are secured by hypothecation of assets underlying the leases. Finance lease obligations are payable on monthly / quarterly payment of equated monthly installments beginning from the month subsequent to taking the lease. Period of maturity for the lease obligations of vehicles is 4 years and for equipments it ranges from 3 years to 5 years. Also refer note 27(a).

* Net of recoveries amounting to Rs. 191.68 lakhs (31 March 2017: Rs. 191.68 lakhs) and including payment of Rs. 2.13 lakh (31 March 2017: Rs. 58.23 lakhs) from / to 3M Electro & Communication India Private Limited, a subsidiary of 3M Company, USA.

27 (a) Finance lease obligations

The Company has taken vehicles, leasehold improvements and data processing equipment under finance lease agreements. The minimum lease rental payments under the finance leases are as under:

(b) Operating leases

A. Leases as lessee

The Company has taken office premises, warehouse and residential premises under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under non-cancellable lease term is as under:

3 Inter Company agreements and arrangements

a) Intellectual property agreement - The Company has entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from 1 July 2006 to 30 June 2009. These payments have been reinstated with effect from 1 July 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective 1 July 2013. Accordingly, the Company has incurred an expenditure of Rs. 3,078.73 lakhs for the year ended 31 March 2018 (31 March 2017: Rs. 3,273.92 lakhs) .

b)(i) Support services/ corporate management fees - The Company has entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from 1 April 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated 1 January 2003 which was terminated on 31 March 2009.

The Company has also entered into support services agreement with 3M Hong Kong Ltd with effect from 1 January 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated 1 April 2009.

The Company has accrued an amount of Rs. 2,948.75 lakhs (31 March 2017 : Rs. 2,484.46 lakhs) in respect of estimated liability for the above services during period 1 January 2018 to 31 March 2018, the actual liability would be ascertained by December 2018.

(ii) The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates. Accordingly the Company has charged Rs. 1,476.51 lakhs (31 March 2017 : Rs. 1,193.17 lakhs).

c) Contract research agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective 1 July 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 2,320.80 lakhs (31 March 2017 : Rs. 2,295.37 lakhs).

4 Employee stock option plan

A. Description of share based payment arrangements

i) Share purchase plan (equity-settled)

3M Company, USA, the parent Company has offered ‘General Employees Stock Purchase Plan’ to all the employees of the Company, under which the employees of the Company are eligible to purchase the shares of 3M Company, USA at 85% of the market price of the share. Under the plan, the Company deducts the amount from the monthly salary of the employees and remits the amount to 3M Company, USA. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 262.13 lakhs (2017: Rs. 178.96 lakhs) and cumulatively amounting to Rs. 993.10 lakhs (2017: Rs. 730.97 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 30.88 lakhs (2017: Rs. 19.35 lakhs) is pending remittance to the holding Company and the same is included under ‘Other financial liabilities’ (refer note 17).

ii) Stock appreciation rights and Restricted stock units (cash-settled)

3M Company, USA has established 3M Company Long Term Incentive Plan (LTIP). As a part of the plan, Executive Directors and Senior Executives of the Company are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs) / restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. Exercise price of SARs and RSUs will be Nil.

B. Measurement of fair values

The Company measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black - Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M Company, USA on the date of the grant.

The fair value of the cash settled SARs and the inputs used in the measurement of fair value at grant date and measurement date of the SARs are as follows:

The expected term of the SARs is estimated based on the vesting term and contractual term of the SARs, as well as expected exercise behaviour of the employee who receives the SAR. Expected volatility during the expected term is based on historical volatility of the observed market prices of the 3M Company USA’s publicly traded equity shares particularly over the historical period commensurate with the expected term.

C. Reconciliation of outstanding share options

The activity in the cash-settled share based payment transactions during the year ended 31 March 2018 is set out below:

D. Expense recognised in Statement of profit and loss

An amount of Rs. 2,795.19 lakhs (31 March 2017: Rs. 1,391.25 lakhs) has been debited to the Statement of profit and loss for the year and included under Employee benefits expense.

The above disclosures have been made to the extent information is available with the Company.

5 Employee benefits

(a) Defined contribution plan

The Company offers its employees defined contribution plans in the form of Provident Fund (PF), Superannuation Fund (SF), Employees’ State Insurance (ESI). Contribution to SF is made to 3M India Superannuation Fund. Other contributions are made to the Government’s funds. While both the employees and the Company pay predetermined contributions into the Provident Fund and the ESI Scheme, contributions into superannuation fund are made only by the Company. The contributions are normally based on a certain proportion of the employee’s salary.

During the year, the Company has recognised the following amounts in the Statement of profit and loss, which are included in contribution to provident and other funds:

(b) Defined benefit plan

The Company provides for gratuity, a defined benefit plan (the Gratuity Plan), to its employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, of an amount based on the respective employee’s last drawn salary and years of employment with the Company. The Company contributes all ascertained liabilities towards gratuity to the 3M India Limited Employees Gratuity Fund Trust. Trustees administer contributions made to the trust. As of 31 March 2018 and 31 March 2017, the plan assets have been primarily invested in insurer managed funds.

Notes :

1. The discount rate is based on the prevailing market yield on Government securities as at the balance sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2017 : Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2018.

6 Related party transaction

Names of related parties and nature of relationship:

i) Holding company 3M Company, USA

ii) Fellow subsidiaries 3M China Limited 3M Lanka Private Limited

3M Thailand Limited Dyneon B.V.

3M France S.A.S. 3M Belgium S.A./N.V.

3M Gulf Limited 3M Mexico, S.A. de C.V.

3M Electro & Communication India Private Ltd Cogent Systems, Inc.

3M Asia Pacific Pte. Ltd 3M Singapore Pte. Ltd.

P.T. 3M Indonesia 3M Material Technology(Hefei) Co Limited

3M APAC RDC Pte Limited Sumitomo 3M Limited

3M Argentina S.A.C.I.F.I.A. 3M Film Construction(Shanghai) Co Limited

3M Australia Pty. Limited 3M Taiwan Limited

3M Canada Company 3M Technologies (S) Pte Ltd

3M Do Brasil Limitada 3M Philippines, Inc.

3M EMEA, GmbH 3M Health Care Sales Limited

3M Espana, S.A. 3M Pakistan Private Limited

3M Hong Kong Limited 3M Cogent Systems (Shenzhen) Inc.

3M Innovation Singapore Pte Limited 3M Health Care Ltd, Japan

3M Italia S.P.A. 3M Japan Products Ltd.

3M Japan Ltd 3M International Trading (Shanghai) Co., Ltd

3M Malaysia Sdn. Bhn. 3M New Zealand

3M Nederland Holding B.V. 3M Panama S.A

3M Svenska AB 3M Speciality Materials

3M Sanayi AS Ticaret 3M Traffic Manufacturing (Shanghai) Co. Ltd.

3M Oesterreich GmbH 3M Rapphold Winterthur

3M Korea Limited 3M Vietnam Limited

3M Korea Health & Safety Ltd 3M Turkey

3M Korea High Tech, Korea 3M Hellas Limited

3M United Kingdom PLC 3M Kenya Ltd.

3M Deutschland GmbH 3M CN Shenzhen

3M ESPE Dental AG 3M Germany Hilden GmbH

EMFI SAS 3M Industrial Tapes Ltd.

3M Innovation Properties Company 3M Innovation (Thailand) Co. Ltd.

Dyneon GmbH 3M International Trading (Shanghai) Co. Ltd.

3M Unitek Corporation 3M LATIN AMERICA

3M International Trading (TJ) Co., Limited 3M Turkiye

3M Material Tech(Guangzhou) Co., Limited 3M UK Holdings Limited

3M Wroclaw SP. Z O.O. 3M Wendt GmbH

Biotrace Limited 3M Winterthur Technologies AG

3M Sweden 3M Touch System Singapore PTE

Wendt Boart S.A 3M South Africa (Pty) Ltd

3M Saudi Arabia

iii) Key management personnel Executive Directors

Amit Laroya (Resigned effective 31 May 2016 as Managing Director)

Debarati Sen (Appointed effective 1 June 2016 as Managing Director)

B V Shankaranarayana Rao (Whole- time Director)

Non-executive Directors

Amit Laroya (Non-executive Director effective 1 June 2016)

Bharat D. Shah Biren Gabhawala

Radhika Rajan (Appointed effective 27 May 2016)

Albert C. Wang

Sadhana Kaul (Resigned effective 27 May 2016)

Ramesh Ramadurai Manuel B. Pardo

Others

Mamta Gore (Appointed effective 01 March 2018 as Chief Financial Officer)

Panagiotis Goulakos (Resigned effective 31 December 2017 as Chief Financial Officer)

V. Srinivasan (Company Secretary)

The details of the amounts due to or due from related parties are as follows:

7 Segment Reporting

A. Basis for segmentation

Ind AS 108 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the “management approach” as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the significant accounting policies.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments. The Company has five reportable segments, as described below. For each of the segments, the Company’s Managing Director reviews internal management reports on at least a quarterly basis.

Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

B. Information about reportable segments

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit (before tax), as included in the internal management reports that are reviewed by the CODM. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other un-allocable income net off un-allocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

8 Corporate social responsibility

During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs. 557.92 lakhs (31 March 2017: Rs. 361.08 lakhs) in accordance with Section 135 of the Companies Act, 2013. The following amounts were spent during the current and previous year:

9 Contingent liabilities and commitments:

Notes:

(i) Income tax matters mainly relate to inter-Company charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.50 lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books.

(iii) The Company was issued a Show Cause Notice dated 8th December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of customs duty on inter-company transactions for import of goods and services and hence proposing to demand differential duty of customs covering the transactions during the period 8th December 2011 to 7th February 2014. The Company has received an order in original on 1st October 2017 from Additional Director General - DRI (Adjudication), Mumbai confirming the demand raised in show cause notice to the tune of Rs.7,693.52 lakhs along with penalty equivalent to the duty and additional penalty of Rs.1,000 lakhs and interest. The Company has filed an appeal against this order with CESTAT, Mumbai after making payment of mandatory deposit of Rs.577 lakhs.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2005-06 to 2013-14. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

10 Capital management

The Company’s policy is to maintain a stable capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors capital on the basis of return on capital employed as well as the debt to total equity ratio.

For the purpose of debt to total equity ratio, debt is debt as considered under long-term and short-term borrowings which is on account of finance lease on office equipment and vehicles. Total equity comprise of issued share capital and all other equity reserves.

B. Financial Risk Management

The Company has exposure to the following risk arising from financial instruments

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company’s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed half-yearly.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables.

Expected credit loss assessment for the Company as 31 March 2017 and 2018.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment and including forward looking information.

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 55,976.46 lakhs (31 March 2017: 43,059.48 lakhs), the exposure considered for expected credit loss is Rs. 54,538.37 lakhs (31 March 2017 :Rs. 41,414.71). The balance which is not considered for impairment pertains to intercompany receivables and secured debtors.

iii. Liquidity risk

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

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US Dollar or Euro against all other currencies as at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

---

Mar 31, 2017

Notes :

1. The discount rate is based on the prevailing market yield on Government securities as at the Balance Sheet date for the estimated term of obligations.

2. The estimates of future increase in compensation levels, considered in the actuarial valuation, have been taken on account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3. As per the best estimate of the management, contribution of Rs. Nil (31 March 2016: Rs. Nil) is expected to be paid to the plans during the year ending 31 March 2018.

4 Related party transaction

Names of related parties and nature of relationship:

i) Holding Company 3M Company, USA

ii) Fellow subsidiaries 3M China Limited 3M Lanka Private Limited

3M Thailand Limited Dyneon B.V.

3M France S.A.S. 3M Belgium S.A./N.V

3M Gulf Limited 3M Mexico, S.A. de C.V.

3M Electro & Communication India Private Ltd Cogent Systems, Inc.

3M Asia Pacific Pte.Ltd 3M Singapore Pte. Ltd.

P.T. 3M Indonesia 3M Material Technology(Hefei) Co Limited

3M APAC RDC Pte Limited Sumitomo 3M Limited

3M Argentina S.A.C.I.F.I.A. 3M Film Construction(Shanghai) Co Limited

3M Australia Pty. Limited 3M Taiwan Limited

3M Canada Company 3M Technologies (S) Pte Ltd

3M Do Brasil Limitada 3M Philippines, Inc.

3M EMEA, GmbH 3M Health Care Sales Limited

3M Espana, S.A. 3M Pakistan Private Limited

3M Hong Kong Limited 3M Congent Systems (Shenzhen) Inc.

3M Innovation Singapore Pte Limited 3M Health Care Ltd, Japan

3M Italia S.P.A. 3M Japan Products Ltd.

3M Japan Ltd 3M International Trading (Shanghai) Co., Ltd

3M Malaysia Sdn. Bhn. 3M New Zealand

3M Nederland Holding B.V. 3M Panama S.A

3M Svenska AB 3M Speciality Materials

3M Sanayi AS Ticaret 3M Traffic Manufacturing (Shanghai) Co. Ltd.

3M Oesterreich GmbH 3M Rapphold Winterthur

3M Korea Limited 3M Vietnam Limited

3M Korea Health & Safety Ltd 3M Turkey

3M Korea High Tech, Korea 3M Hellas Limited

3M United Kingdom PLC 3M Kenya Ltd.

3M Deutschland GmbH 3M CN Shenzhen

3M ESPE Dental AG 3M Germany Hilden GmbH

EMFI SAS 3M Industrial Tapes Ltd.

3M Innovation Properties Company 3M Innovation (Thailand) Co. Ltd.

Dyneon GmbH 3M International Trading (Shanghai) Co. Ltd.

3M Unitek Corporation 3M LATIN AMERICA

3M International Trading (TJ) Co., Limited 3M Turkiye

3M Material Tech(Guangzhou) Co., Limited 3M UK Holdings Limited

3M Wroclaw SP. Z O.O. 3M Wendt GmbH

Biotrace Limited 3M Winterthur Technlogies AG

iii) Key management personnel Executive Directors

Amit Laroya (Resigned effective 31 May 2016 as Managing Director)

Debarati Sen (Appointed effective 1 June 2016 as Managing Director)

B V Shankaranarayana Rao (Director)

Non-executive Directors

Amit Laroya (Non-executive Director effective 1 June 2016)

Bharat D. Shah Biren Gabhawala

Radhika Rajan (Appointed effective 27 May 2016)

Albert C. Wang

Sadhana Kaul (Resigned effective 27 May 2016)

Ramesh Ramadurai Manuel B. Pardo

B. S. Iyer (Resigned effective 31 March 2016)

Others

Panagiotis Goulakos (Appointed effective 15 March 2016 as Chief Financial Officer) Sameer Agarwal (Resigned effective 31 March 2016 as Chief Financial Officer)

V. Srinivasan (Company Secretary)

In the annual general meeting held on 5 August 2016, the Company had obtained approval from its shareholders for the material related party transactions to be entered into with 3M Company, USA for the year ended 31 March 2017. As the actual transactions entered into with 3M Company, USA during the year ended 31 March 2017 exceeded the amount approved by the shareholders, the Company will seek approval from its shareholders in the ensuing annual general meeting to ratify the excess amount.

5 Segment Reporting

A. Basis for segmentation

Ind AS 108 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. Based on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (CODM) evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the significant accounting policies.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments. The Company has five reportable segments, as described below. For each of the segments, the Company''s Managing Director reviews internal management reports on at least a quarterly basis. Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other unallowable income net off unallowable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The following summary describes the products included in each of the Company''s reportable segment:

Reportable segments Products

Industrial Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives:

Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape, Functional and Decorative Graphics, Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials.

Health care Major products include medical and surgical supplies, medical devices, skin & wound care and infection prevention

products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

Safety and Graphics Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene products for the hospitality industry. Graphics business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and brightness enhancement films for television, avionics and automotive displays.

Consumer Consumer and Office business includes products such as Scotch brand, addressing the Home & Office tapes,

Adhesives, Packaging protection platforms, Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotch guard brand addressing the stain protection market.

Energy Energy business includes products such as Fusion Bonded Epoxy coatings, Sun films and renewable energy.

Segment revenue, results, assets and liabilities figures include the respective amounts identifiable to each of the segments. Other unallowable income net off unallowable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

* The term ''Specified Bank Notes'' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated 8 November 2016.

6 Corporate social responsibility

During the year, the amount required to be spent on corporate social responsibility activities amounted to Rs. 361.08 lakhs (31 March 2016: Rs. 205.88 lakhs) in accordance with Section 135 of the Companies Act, 2013. The following amounts were spent during the current and previous year:

Notes:

(i) Income tax matters mainly relate to intercompany charges.

(ii) The Company during the year 2012-13 had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.51 lakhs, contending the a ailment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company has filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognized in the books.

(iii) The Company has been issued with a Show Cause Notice dated 8 December 2016 by the Directorate of Revenue Intelligence (DRI) in relation to levy of custom duty on inter-Company transactions for import of goods and services and hence proposing to demand differential duty of customs totally amounting to Rs. 8,007.49 lakhs under the provisions of Section 28(4) of the Customs Act, 1962 for import of goods through 13 ports. The proposal for demand of duty is for the period from 8 December 2011 to 7 February 2014 for goods imported from M/s 3M USA and its affiliates. The Company has already paid an amount of Rs. 50 lakhs under protest.

(iv) Sales tax cases primarily pertains to Maharashtra Value Added Tax Act, 2002 and Karnataka Value Added Tax Act, 2003. These are pertaining to the years from 2005-06 to 2011-12. These cases are with respect to the applicable rate of tax for various products and matters pertaining to declaration forms.

(v) Service tax matters relates to cases with respect to manner of apportionment of credit availed by the Company without registering as an Input service distributor.

(vi) Excise matters relates to penalty for allegedly dealing in goods liable to confiscation under Rule 26 of the Central Excise Act.

During the year ended 31 March 2017 no material foreseeable loss (previous year: nil) was incurred for any long-term contract including derivative contracts.

7 First time adoption of Ind AS

For the purposes of reporting as set out in note 2, we have transitioned our basis of accounting from Indian Generally Accepted Accounting Principles ("IGAAP") to Ind AS. The accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS Balance Sheet as at 1 April 2015 (the "transition date").

In preparing our opening Ind AS Balance Sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP. An explanation of how the transition from IGAAP to Ind AS has affected our financial performance, cash flows and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under IGAAP except where required by Ind AS.

* The previous GAAP figures have been reclassified to conform to Ind AS presentation requirements for the purpose of this note.

a. Property, plant and equipment

As per Ind AS 16, the cost of the item of Property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company had estimated the liability incurred for dismantling the assets and discounted the same using the remaining life of the leased assets. This is included in the cost of the lease hold asset and depreciated accordingly. Similarly, a provision for asset retirement obligation is created and shown under "Long-term provisions".

b. Other financial assets

Under the previous GAAP, interest free security deposits were recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly, the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognized as prepaid rent. The interest unwinding on the same is shown as "other income".

c. Deferred tax assets (net)

The (decrease) / increase in the deferred tax assets are on account of adjustments made on transition to Ind AS.

d. Trade receivables

On transition to Ind AS, the Company has recognized impairment loss on trade receivables based on expected credit loss model as required by ''Ind AS 109 "Financial Instruments". The Company measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables. Consequently trade receivables have been reduced with a corresponding decrease in the Statement of profit and loss for the year ended 31 March 2016.

f. Share based payment

The Company under the previous GAAP recognized costs in relation to share based payments on a straight-line basis. Under Ind AS, the Company is required to account for share based payments in a graded vesting manner under an accelerated amortization model. Accordingly, the Company has incurred an incremental charge due to such accelerated amortization of share options.

g. Other current liabilities

As per Ind AS 17 "Leases", if the Company has a rent escalation clause which is in line with inflationary conditions, there is no requirement for rent equalization. Since the rate of inflation is in line with the rent escalation, hence the adjustments towards rent equalization is reversed.

h. Provisions

Under Ind AS, the provision for warranty is present valued using the effective interest rate. The present value of the provision is shown in the Balance Sheet as a provision and the interest unwinding on the same is shown as an expense.

i. Revenue from operations

Under the previous GAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of profit and loss as part of expenses. This change has resulted in an increase in the revenue from operation and expenses for the year ended 31 March 2016. There is no impact on the total equity and profit.

j. Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the Statement of profit and loss as ''other comprehensive income'' includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.

k. Cash flow statement

There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.

The fair value of financial assets and financial liabilities approximates to their carrying amount largely due to the short-term nature of these instruments.

B. Financial Risk Management

The Company has exposure to the following risk arising from financial instruments

- Credit risk

- Liquidity risk

- Market risk

i. Risk management framework

The Company''s principal financial liabilities comprise finance lease obligations, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include trade and other receivables, cash and cash equivalents that are derived directly from its operations.

ii. Credit risk

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

(a) Financial assets that are not credit impaired

The Company has financial assets which are in the nature of cash and cash equivalents, loans to employees, unbilled revenue from related party, interest accrued on fixed deposits and receivables from related parties which are not credit impaired. These are contractually agreed with either banks, related parties or employees where the probability of default is negligible.

(b) Financial assets that are credit impaired Trade receivables

The Credit services team has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available. Sale limits are established for each customer and reviewed half-yearly.

Expected credit loss assessment for the Company as at 1 April 2015, 31 March 2016 and 31 March 2017.

The Company has divided all the debtors outstanding for the last twelve quarters into age brackets of not due, 0-90 days, 91-180 days, 181-270 days, 271-365 days and amounts outstanding for more than one year.

The Company has calculated the impairment loss arising on account of past trends in the default rate for time bucket.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forward looking information.

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Out of the total trade receivables of Rs. 40,791.66 lakhs (31 March 2016 : Rs. 31,848.84 lakhs, 1 April 2015 : 29,480.54 lakhs), the exposure considered for expected credit loss is Rs. 41,364.97 lakhs (31 March 2016 : Rs. 33,020.50 lakhs, 1 April 2015 : 29,933.87 lakhs). The balance which is not considered for impairment pertains to intercompany receivables and secured debtors.

The following table provides information about the exposure to credit risk and expected credit loss for trade and other receivables:

iii. Liquidity risk

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

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

The table below provides details regarding the contractual maturities of significant financial liabilities -

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Company is exposed to market risk primarily related to foreign exchange rate risk. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the US dollar or Euro against all other currencies at 31 March would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

9 The financial statements for the year ended 31 March 2016 and 31 March 2015 were audited by a firm other than B S R & Co. LLP.

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Mar 31, 2014

1. GENERAL INFORMATION

3M India Limited (''the Company'') is the subsidiary of 3M Company, USA. The Company manages its operations in five operating segments: Industrial, Health Care, Safety and Graphics, Consumer and Energy. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore.

With effect from April 1, 2013, the Company internally aligned its operating divisions to new segments viz., Industrial, Health Care, Safety and Graphics, Consumer and Energy from its old segments viz., Industrial and Transportation Business, Health Care Business, Safety, Security and Protection Services Business, Consumer and Office Business, Display and Graphics Business. 3M India''s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

2. RESEARCH AND DEVELOPMENT

In the year 2012-13, the Company has received approval under section 35 (2AB) of the Income Tax Act 1961 for its recognised In- House Research and Development Center at Bangalore with effect from July 20, 2012 to March 31, 2015. Accordingly, total revenue expenditure (net of recoveries) on Research and Development for the year 2013-14 is proposed to be considered for certain Income Tax benefits.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the Statement of Profit and Loss account for the period ended March 31, 2014 an amount of Rs. 1,273.64 lakhs (2013: Rs. 1,550.06 lakhs) expenses under defined contribution plans.

4. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulations for computing the taxable income and expenditure from ''international transactions'' between ''associated enterprises'' on an ''arm''s length'' basis. In addition to above, The Finance Act, 2012 has amended/inserted, with effect from assessment year 2013-14 (Effective April 01, 2013), Transfer Pricing Regulations for computing the taxable income and expenditure from ''Specified Domestic Transactions'' not being an international transaction between ''associated enterprises'' on an ''arm''s length'' basis. These regulations, inter-alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within due date of filing the Return of Income. For the year March 31, 2013 prescribed certificate of the Accountant has been obtained and this did not envisage any tax liability. For the fiscal year March 31, 2014, the Company is in the process of obtaining the certificate of the Accountant. The Company does not envisage any tax implication arising based out of such study. For the financial year ending March 31, 2012, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and accordingly Company in the previous year had recognised an amount of Rs. 58.94 lakhs towards tax on voluntary Transfer Pricing adjustments relating to the financial year ended March 31, 2012 for Consumer and Office Business segment.

5. RELATED PARTY TRANSACTIONS: Names of related parties and nature of relationship: i) Holding Company 3M Company, USA

ii) Key Management personnel

Ajay Nanavati (up to 30th September, 2013) Amit Laroya (from 1st October, 2013) B.V. Shankaranarayana Rao Sadhana Kaul (up to 31st October, 2013)

6. ASSETS TAKEN ON LEASE Operating Lease:

The Company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under non- cancellable lease term as at March 31, 2014 is as under:

7. DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENY EXPOSURE

a. Derivatives outstanding as at the reporting date

Particulars Purpose

Forward Contracts to Sell USD Hedge of firm commitment and - highly profitable forecast transaction

Forward Contracts to buy USD Hedge of external commercial borrowings -

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organisation structure as well as the differential risks and returns of these segments.

Segment revenue, results and capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover.

Accordingly, there are no reportable geographical segments.

With effect from April 1, 2013, the Company internally aligned its operating divisions to new segments viz., Industrial, Health Care,

Safety and Graphics, Consumer and Energy from its old segments viz., Industrial and Transportation Business, Health Care

Business, Safety, Security and Protection Services Business, Consumer and Office Business, Display and Graphics Business.

The products included in each of the reported segments are as follows:

(a) Industrial: Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion- Resistant Films, Masking Tapes and Other Specialty Materials.

b) Health Care: Major products include medical and surgical supplies, medical devices, skin & wound care and infection preven- tion products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

c) Safety and Graphics: Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene products for the hospitality industry.

Graphics Business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and brightness enhancement films for televi- sion, avionics and automotive displays.

d) Consumer : Consumer and Office Business includes products such as Scotch brand, addressing the Home & Office tapes, Adhesives, Packaging protection platforms; Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotchguard brand addressing the stain protection market.

e) Energy: Energy includes products such as Fusion Bonded Epoxy coatings, Sun films and renewable energy.

8. STOCK OPTION

3M Company, USA (3M), the parent company has offered ''General Employees Stock Purchase Plan'' to all the employees of the company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 63.13 lakhs (2013:Rs. 49.31 lakhs) and cumulatively amounting to Rs. 373.51 lakhs (2013: Rs. 310.38 lakhs) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 5.87 lakhs (2013: Rs. 4.69 lakhs) is pending remittance to the holding company and the same is included under Other Current Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M Company, USA via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan.

3M measures compensation expense for stock appreciation rights (SARs) at their fair value determined using Black – Scholes Model and restricted stock units (RSUs) based on fair market value of shares of 3M USA on the date of Grant for respective countries including India. Accordingly, an amount of Rs. 615.38 lakhs (2013: Rs. 299.59 lakhs) has been debited to the Statement of Profit and Loss account for the year and included under Employee Benefit Expenses.

During the year the Company has granted to employees of the Company 14,621 stock appreciation rights (SARs) (2013: 16,600) and 4,847 restricted stock units (RSUs) (2013: 3,320) on various dates of which none are vested. However 14,978 stock appreciation rights (SARs) (2013: 3,917) and 3,151 restricted stock units (RSUs) (2013: 3,233) were settled on account of being fully vested and exercised/forfeited resulting in an outstanding balance of 43,826 stock appreciation rights (SARs) (2013: 44,283) and 12,626 restricted stock units (RSUs) (2013: 10,930) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

9. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual property agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. The Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA has been revised effective July 1, 2013. Accordingly, the Company has incurred an expenditure of Rs. 1,375.71 lakhs (2013: Rs. 1,051.96 lakhs) for the period April 1, 2013 to March 31, 2014.

b) (i).Support services/ corporate management fees – The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU''s) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,550.00 lakhs (2013: Rs. 1,300.00 lakhs) in respect of estimated liability for the above services during period January 1, 2014 to March 31, 2014; the actual liability would be ascertained by December 2014.

(ii).The support service agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company''s Global Financial Standard on FSEs. Accordingly the Company has recognised a receivable of Rs. 1,019.89 lakhs (2013: Rs. 702.98 lakhs).

c) Contract research agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognised an income of Rs. 2,424.62 lakhs (2013: Rs. 1,725.45 lakhs).

10. The company during the year has recognised incremental service tax input credit pertaining to previous years. Accordingly, an amount of Rs. 123 lakhs pertaining to financial year 2011-2012 and Rs. 461.27 lakhs pertaining financial year 2012-13 has been included under other income.

11. Previous year''s figures have been regrouped / reclassified wherever necessary to conform to current year classification.

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Mar 31, 2013

1. GENERAL INFORMATION

3M India Limited (''the Company'') is the subsidiary of 3M Company, USA. The Company markets several products in India in health care; industrial markets; display and graphics; consumer and office; safety, security and protection services; and transportation. In India, the Company has manufacturing facilities at Ahemdabad, Bangalore, Pune and has a R&D Center in Bangalore.

The Company manages its operations in five operating business segments: Industrial and Transportation Business; Health Care Business; Display and Graphics Business; Consumer and Office Business and Safety, Security and Protection Services Business. 3M India''s five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

2. RESEARCH AND DEVELOPMENT

During the year, the Company has received approval under section 35 (2AB) of the Income Tax Act 1961 for its recognised In- House Research and Development Center at Bangalore with effect from July 20, 2012 to March 31, 2015. Accordingly, total revenue expenditure (net of recoveries) on Research and Development for the period July 20, 2012 to March 31, 2013 is proposed to be considered for certain Income Tax benefits.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the Statement of Profit and Loss account for the period ended March 31, 2013 an amount of Rs. 1,550.06 (2012: Rs. 1,551.08) expenses under defined contribution plans.

4. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulations for computing the taxable income and expenditure from ''international transactions'' between ''associated enterprises'' on an ''arm''s length'' basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within due date of filing the Return of Income. For the financial year ending March 31, 2012, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and accordingly company has recognised an amount of Rs. 58.94 towards tax on voluntary Transfer Pricing adjustments relating to the financial year ended March 31, 2012 for Consumer and Office Business segment.

For the fiscal year March 31, 2013, the Company is in the process of updating the transfer pricing study to comply with the said regulation. The management do not envisage any tax implication arising based out of such study.

5. ASSETSTAKEN ON LEASE

Operating Lease:

The Company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under non- cancellable lease term as at March 31, 2013 is as under:

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organization structure as well as the differential risks and returns of these segments.

Segment revenue, results and capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments.

Presently, the Company''s operating results were managed on the basis of its existing segment structures viz., Industrial and Transportation, Health Care, Display and Graphics, Consumer and Office and Safety, Security and Protection Services through April 2012 to March 2013.

The products included in each of the reported segments are as follows:

(a) Industrial and Transportation Business: Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials.

b) Health Care Business: Major products include medical and surgical supplies, medical devices, skin & wound care and infection prevention products & solutions, drug delivery systems, dental and orthodontic products and food safety products.

c) Safety, Security and Protection Services Business: Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial estab- lishments, track and trace products, cleaning and hygiene roducts for the hospitality industry.

d) Consumer and Office Business: Consumer and Office Business includes products such as Scotch brand, addressing the Home & Office tapes, Adhesives, Packaging protection platforms; Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotchguard brand addressing the stain protection market.

e) Display and Graphics Business: Display & Graphics Business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and bright- ness enhancement films for television, avionics and automotive displays.

Consistent with 3M''s global strategy of building relevance and presence in the marketplace, the Company will also align resources and management towards a new revised structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Energy, with the intention that results be managed under the new alignment once it is fully effective from April 1, 2013 onwards.

6. STOCK OPTION

3M Company, USA (3M), the parent company has offered ''General Employees Stock Purchase Plan''to all the employees of the Company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 49.31 (2012: Rs. 44.36) and cumulatively amounting to Rs. 310.38 (2012: Rs. 261.07) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 4.69 (2012: Rs. 3.42) is pending remittance to the holding company and the same is included under Other Current Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan.

3M measures compensation expense for stock appreciation rights (SARs) and restricted stock units (RSUs) at their fair value determined using Black - Scholes Model on the date of Grant for respective countries including India. Accordingly, an amount of Rs.299.59 (2012: Rs. 319.81 ) has been debited to the Statement of Profit and Loss account for the year and included under Employee benefit Expenses.

During the year the Company has granted to employees of the Company 16,600 stock appreciation rights (SARs) (2012: 8,858) and 3,320 restricted stock units (RSUs) (2012:1,968) on various dates of which none are vested. However 3,917 stock appreciation rights (SARs) (2012: 2,547) and 3,233 restricted stock units (RSUs) (2012: 2,848) were settled on account of being fully vested and exercised resulting in an outstanding balance of 44,283 stock appreciation rights (SARs) (2012:34,734) and 10,930 restricted stock units (RSUs) (2012:10,371) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

7. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual Property Agreement - The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 1,051.96 (2012: Rs. 1,195.72) for the period April 1, 2012 to March 31, 2013.

b) (i). Support Services/Corporate Management Fees - The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU''s) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,300.00 (2012: Rs. 1,250.00) in respect of estimated liability for the above services during period January 1, 2013 to March 31, 2013; the actual liability would be ascertained by December 2013.

(ii).The Support Service Agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company''s Global Financial Standard on FSEs. Accordingly the Company has recognized a receivable of Rs. 702.98 (2012: Rs. 696.44).

c) Contract Research Agreement - The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,725.45 (2012: Rs. 1,410.92).

8. Previous year''s figures have been regrouped / reclassified wherever necessary to conform to current year classification.

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Mar 31, 2012

1. GENERAL INFORMATION

3M India Limited ('the Company') is the subsidiary of 3M Company, USA. The Company markets about 7000 products in India in health care; industrial markets; display and graphics; consumer and office; safety, security and protection services; and transportation. In India, the Company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore.

The Company manages its operations in five operating business segments: Industrial and Transportation Business; Health Care Business; Display and Graphics Business; Consumer and Office Business and Safety, Security and Protection Services Business. 3M India's five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE).

a) Rights, preferences and restrictions attached to shares

The Company has only one class of shares referred to as equity shares having a par value of Rs.10/-. Each holder of equity shares is entitled to one vote per share. 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, in proportion to their shareholding.

Notes:

a) Warranty provisions (net of reimbursements) relates to the estimated outflow in respect of products sold by the Company which are generally covered under a warranty of one to five years.

b) Sales tax provision represents estimates made for probable liabilities arising out of pending disputes/ litigations with sales tax and other regulatory authorities. The timing of the outflow with these matters depends on the position of law and the settlement of which is not expected to exceed two-three years in most cases.

c) The Company sets up and maintains provisions for other payables when a reasonable estimate can be made. These provisions are made based on estimates made by the management that are reviewed periodically and involve quick settlements not exceeding a period of two-three years in most cases.

Contingent Liabilities not provided for

a) Guarantees:

- Issued by Company's Bankers 1,192.40 750.55

b) Claims against the Company not acknowledged as debts

- Income Tax matters [net of amount paid under protest Rs. 83.71 1,238.70 776.55 (2011: Rs. 83.71)

- Others (refer note 11) 181.77 -

c) Certain Industrial/ customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (b) above are determinable only on receipt of judgments/ decisions pending with various forums/authorities

Notes

a) Deposit from customers are towards sale of goods and services repayable on completion of contractual obligation with interest.

b) There are no amounts due for payment to the Investor Education and Protection Fund under Section 205C of the Companies Act, 1956 as at the year end.

The tax impact for the above purpose has been arrived by applying a tax rate of 32.445% (2011: 32.445%) being the prevailing tax rate for Indian Companies under the Income Tax Act, 1961.

Deferred Tax Assets and Deferred Tax Liabilities have been offset as they relate to the same governing taxation laws.

* Net of recoveries amounting to Rs. 191.68 (2011: Rs. 161.02) recovered from 3M Electro & Communication India Private Limited, a subsidiary of 3M Company, USA.

2. RESEARCH AND DEVELOPMENT

During the year, the Company has started a Research and Development Center (Innovation Center) in Bangalore. The Company has also made an application to Department of Scientific and Industrial Research (DSIR) for recognition of the said Innovation Center as a recognised In-House Research and Development Center.

3. EMPLOYEE BENEFITS

a) The Company has recognised, in the profit and loss account for the period ended March 31, 2012 an amount of Rs. 1,551.08 (2011: Rs. 1,144.86) expenses under defined contribution plans.

Notes:

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

b) As per management estimate, contribution of Rs. 200.00 (2011: Rs. 250.00) is expected to be paid to the plan during the year ending March 31, 2013.

Notes:

a) The above does not include related party transactions with retiral funds, as the key management personnel who are trustees of the funds cannot individually exercise significant influence on the retiral fund transactions.

b) The above information has been determined to the extent such parties have been identified on the basis of information available with the Company.

c) None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the period.

d) As gratuity and compensated absences are computed for all the employees in aggregate, the amounts relating to the Key Managerial Personnel cannot be individually identified.

e) Appointed as Director with effect from 31 October, 2011, subject to the approval from the Share holders in the ensuing Annual General Meeting.

f) Figures in brackets relates to the previous year.

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organization structure as well as the differential risks and returns of these segments.

Segment revenue, results and capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments.

4. STOCK OPTION

3M Company, USA (3M), the parent company has offered 'General Employees Stock Purchase Plan' to all the employees of the company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 44.36 (2011:Rs.35.40) and cumulatively amounting to Rs. 261.07 (2011: Rs. 216.71) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 3.42 (2011: Rs. 3.13) is pending remittance to the holding company and the same is included under Other Liabilities (refer note 9).

3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan

3M measures compensation expense for stock appreciation rights (SARs) and restricted stock units (RSUs) at their fair value determined using Black – Scholes Model on the date of Grant for respective countries including India. Accordingly, an amount of Rs. 319.81 (2011: Rs. Nil) has been debited to the profit and loss account for the year and included under Employee benefit Expenses.

During the year the Company has granted to employees of the Company 8,858 stock appreciation rights (SARs) (2011: 9,333) and 1,968 restricted stock units (RSUs) (2011: 6,664) on various dates of which none are vested. However 2,547 stock appreciation rights (SARs) (2011: 129) and 2,848 restricted stock units (RSUs) (2011: 696) were settled on account of being fully vested and exercised resulting in an outstanding balance of 34,734 stock appreciation rights (SARs) (2011: 28,423) and 10,371 restricted stock units (RSUs) (2011: 11,251) at the end of the year.

The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

5. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:

a) Intellectual Property Agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 1,195.72 (2011: Rs. 897.84) for the period April 1, 2011 to March 31, 2012.

b)(i). Support Services/Corporate Management Fees – The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

The Company has also entered into support services agreement (MOU's) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009.

The Company has accrued an amount of Rs. 1,250.00 (2011: Rs. 1,000.00) in respect of estimated liability for the above services during period January 1, 2012 to March 31, 2012; the actual liability would be ascertained by December 2012.

(ii).The Support Service Agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Company's Global Financial Standard on FSEs. Accordingly the Company has recognized a receivable of Rs. 696.44 (2011: 636.48).

c) Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,410.92 (2011: Rs. 738.86).

6. The financial statements for the year ended March 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended March 31,2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

---

Mar 31, 2011

2010-11 2009-10 (12 Months) (15 Months) Rs. Rs.

1 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Companys Bankers 7,50,54,953 6,68,41,922

b) Claims against the Company not acknowledged as debts:

- Pending Sales Tax matters - 4,17,59,219

- Income Tax matter 8,60,25,606 4,69,17,100

c) Certain Industrial / customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (b) above are determinable only on receipt of judgments / decisions pending with various forums/authorities

(B) Names of related parties and description of the relationship:

(i) Parties where control exists Holding Company

3M Company, St. Paul, USA

(ii) Fellow Subsidiaries

3M A/S

3M Ait Ltd

3M Argentina S.A.C.I.F.I.A.

3M Asset Management S.a.r.l.

3M Australia Pty. Limited

3M Algeria

3M Austin

3M Aycliffe

3M AUST BIOTRACE

3M Alaska

3M Asia Pacific Pte Limited

3M Belgium S.A./N.V.

3M Bolivia

3M BRCKNELL

3M Canada Company

3M China Limited

3M Chile SA

3M Corporate Services B.V.

3M Columbia S.A

3M Cesko

3M Cuno Ltd UK

3M Costa Rica S.A

3M Deutschland GmbH

3M Dominicana S.A

3M do Brasil Ltda

3M (East) A.G.

3M E Wood Manufacturer

3M Ecc Europa B.V.

3M Electro & Communication India Private Ltd

3M Espana, S.A.

3M ESPE A.G.

3M Europe S.A.

3M Ecaudor A.V

3M El Salvador

3M Egypt Trading Ltd

3M Financial Management Company

3M France, S.A.

3M Filtrete B.V

3M Film Construction (Shangai) Company Ltd.

3M German Holdings GmbH

3M Global Capital S.a.r.l.

3M Gulf Ltd.

3M Guatemala S.A

3M Health Care Ltd.

3M Health Information Systems, Inc.

3M Hellas Ltd

3M Hong Kong Limited

3M Hillington UK

3M Hawaii

3M Hungaria Kft

3M Indonesia PT

3M Innovative Properties Company

3M International Group B.V

3M International Trading (Shanghai) Co., Ltd.

3M Investment Management Corporation

3M Italia S.p.A.

3M International Trading (Shenzhen) Company Limited

3M International Trading (Tianjin) Company Limited

3M Philipines Inc

3M Poland Sp z.o.o.

3M Precision Optics, Inc.

3M Puerto Rico, Inc.

3M Pakistan (Pvt) Limited

3M Pharmaceuticals Pty Ltd

3M Portugal

3M Panama S.A

3M Peru S.A

3M Russia

3M Romania SRL

3M Sanayi VE Ticaret AS

3M Sante

3M Sanvetec

3M Singapore Pte Limited

3M Spain

3M Svenska AB

3M Sweden

3M South Africa (Pty) Limited

3M Seremban (M) SYD BHD

3M (Schweiz) A.G.

3M Taiwan Limited

3M Taiwan Optronics Corp.

3M Technologies Private Limited

3M Telecommunications, Pouyet

3M Thailand Limited

3M Touch Systems, Inc.

3M Traffic Safety Material

3M Traffic Mfg Shanghai Co Ltd

3M Turkey

3M United Kingdom Holdings PLC

3M United Kingdom PLC

3M Unitek Corporation

3M Unitek GmbH

3M Ukraine, kiev

3M Uruguay S.A

3M Vietnam Ltd

3M Venezuela Final AV

3M Wroclaw Sp. Z.o.o

ABRASIVOS S.A, Peru

Aearo Holding Corp

Alltech Solutions, Canada

Aplha Beta Enterprises Co. Ltd, Taiwan

Arizant Inc.,Minnesota

Attenti Holdings S.A, Israel

Cogent Inc, California

Cogent Systems India Private Limited

CUNO Engineered Products, Inc

CUNO Filtration Asia Pte. Ltd.

CUNO Filtration SAS

CUNO Incorporated

CUNO Pacific Pty Ltd.

Dailys Ltd, UK

Dedication to Detail Inc

Dyneon GmbH & Co. KG

EMFI S.A, France

Grafoplast Burgienne, France

Hangzhou ORJ Medical Instruements & Material Co. Ltd, China

3M Israel Ltd

3M Ireland

3M Interamerica Inc

3M Korea Health and Safety Limited

3M Korea Limited

3M Korea Hightech Limited

3M Kenya Ltd

3M Limited

3M Lietuva, Lithuania

3M Lanka (Private) Limited

3M Latvija S.A

3M Malaysia SDN. BHD

3M Manufacturera Venezuela, S.A.

3M Material Technology Co., Ltd.

3M Mexico, S.A. de C.V.

3M MarocLa Coline

3M Netherland B.V.

3M New Zealand Ltd

3M Neotechnic Ltd

3M Nevada

3M Norge A/S

3M (New Zealand) Limited

3M Oesterreich GmbH

3M Optical System Mfg. Co.

IMTEC Corp.

Incavas Industria de Cabose Vassouras Ltd, Brazil

Iwate 3M LTD

J.R. Phoenix Ltd, Canada

K&H Surface Technologies Pty Ltd, Australia

Kolors Kevarkian S.A, Argentina

Kyuno Kabushiki Kaisha Sumitomo

Laboratories 3M Sante SAS

Les Entreprises Solumed Inc.,

Ligacon AG, Switzerland

Meguiars Inc

Meguiars International, UK

MTI PolyFab Inc., Canada

Nadco Japan Limited

Polyfoam Products Inc.,

Quest Technologies Inc.,

Riker Laboratories, Inc.

SAPO SAS, France

Seaside Insurance Limited

Security Printing and Systems Ltd.

Sumitomo 3M Ltd

Suomen 3M Oy

Top-Service Fuer Lingualtechnik GmbH, Germany

Yamagata 3M Limited

(iii) Key Management Personnel

Mr. Ajay Nanavati, Managing Director

Mr. B.V. Shankaranarayana Rao, Whole-time Director

Mrs. Sadhana Kaul, Whole-time Director

Notes: i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the year.

ii. The above information has been determined to the extent such parties have been identified on the basis of information provided by the Company, which has been relied upon by the auditors.

iii. The above does not include related party transactions with retiral funds, as Key Management Personnel who are trustees of the fund cannot individually exercise significant influence on the retiral fund transactions.

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organisation structure as well as the differential risks and returns of these segments.

The Company during the period has reassessed its operations based on the nature of products / risk-return profile of individual market segments and revised the business segment into five market segments. Accordingly, the previous year/ period figures have been regrouped, wherever considered necessary, to conform with the current period disclosures.

Segment revenue, results and Capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole.

The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments.

2. The Company does not have a scheme for grant of its stock options either to the Directors or employees for the shares issued in India.

However, the Executive Directors and some senior employees of the Company are entitled to Restricted Stock Options plans of 3M Company, USA.

Further, 3M Company, USA the Holding Company has offered ‘General Employees Stock Purchase Plan to all the employees of the Company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs.35,40,487 (2009-10: Rs. 41,26,116) and cumulatively amounting to Rs. 2,16,70,898 (2009-10: Rs. 1,81,30,411) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 3,12,584 (2009-10: Rs. 3,39,193) is pending remittance to the Holding Company and the same is included under Other Liabilities (Schedule 10).

With respect to the above plans no cross charges/debits have been made by 3M Company, USA.

3. Inter-Company Agreements / Arrangements :

a. Intellectual Property Agreement – The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 8,97,84,479 (2009-10: Rs. 5,41,41,934) for the year April 1, 2010 to March 31, 2011.

b (i). Support Services/Corporate Management Fees – The Company has entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company would be charged a comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

c. Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year under review, Company has recognised a receivable of Rs.7,38,86,089 (2009-10: Rs. 12,32,33,781).

4. (i) The financial statements for the previous period are for 15 months from January 1, 2009 to March 31, 2010, while those for the current period are for 12 months period from April 1, 2010 to March 31, 2011. Accordingly, the figures in the Profit and Loss Account for the two periods are not comparable.

5. Previous periods figures have been regrouped / reclassified wherever necessary to conform to current year classification.

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Mar 31, 2010

2010 2008 Rs. Rs.

1 Contingent Liabilities not provided for :

a) Guarantees:

- issued by Company’s Bankers 4,28,84,565 2,76,05,733

b) Letter of credit opened by banks for purchase of inventory / capital goods 47,70,794 -

c) Bills discounted with banks 1,91,86,563 -

d) Claims against the Company not acknowledged as debts:

- Customs Demands - 31,19,000

- Pending Sales Tax matters 4,17,59,219 8,30,52,912

- Income Tax matter 4,69,17,100 2,31,24,330

e) Certain industrial / customer disputes are pending before various judicial authorities – amounts not ascertainable.

Note: Future cash outflow in respect of (d) above are determinable only on receipt of judgments / decisions pending with various forums/authorities

(B) Names of related parties and description of the relationship:

(i) Parties where control exists Holding Company

(ii) Fellow Subsidiaries

3M (East) A.G.

3M New Zealand Limited

3M (Schweiz) A.G.

3M A/S

3M Ait Ltd

3M Argentina S.A.C.I.F.I.A.

3M Asset Management S.a.r.l.

3M Australia Pty. Limited

3M Algeria

3M Austin

3M Aycliffe

3M Belgium S.A./N.V.

3M Canada Company

3M China Limited

3M Chile SA

3M Corporate Services B.V.

3M Deutschland GmbH

3M E Wood Manufacturer

3M DO Brasil Limitada

3M Ecc Europa B V

3M Electro & Communication India Private Ltd

3M Espana, S.A.

3M ESPE AG

3M Europe S.A.

3M Financial Management Company

3M France, S.A.

3M German Holdings GmbH

3M Global Capital S.a.r.l.

3M Gulf Ltd.

3M Health Care Ltd-UK.

3M Health Information Systems, Inc.

3M Hellas Ltd

3M Hong Kong Limited

3M Hillington UK

3M Indonesia Kbyt

3 M Innovative Properties Company

3M International Group B.V

3M International Trading (Shanghai) Co., Ltd.

3M Investment Management Corporation

3M Italia S.p.A.

3M Korea Health and Safety Limited

3M Korea Limited

3M Limited

3M Malaysia SDN. BHD

3M Manufacturera Venezuela, S.A.

3M Material Technology Co., Ltd.

3M Mexico, S.A. de C.V.

3M Netherland B.V.

3M Health Care Ltd-Japan.

3M Neotechnic Ltd

3M Nevada

3M Norge A/S

3M Oesterreich GmbH

3M AUST BIOTRACE

3M Film Construction (Shangai) Company Limited

(iii) Key Management Personnel

3M Company, USA

3M International Trading (Tianjin) Company Limited

3M South Africa (Proprietary) Limited

3M Seremban (M) Syd Bhd

3M Optical System Mfg. Co.

3M Philipines Inc

3M Poland Sp z.o.o.

3M Precision Optics, Inc.

3M Puerto Rico, Inc.

3M Russia

3M Sanayi VE Ticaret AS

3M Sante

3M Sanvetec

3M Singapore Private Limited

3M Spain

3M Svenska AB

3M Sweden

3M Taiwan Limited

3M Taiwan Optronics Corp.

3M Technologies Private Limited

3M Telecommunications, Pouyet

3M Thailand Limited

3M Touch Systems, Inc.

3M Traffic Safety Material

3M Traffic Mfg Shanghai Co Ltd

3M Turkey

3M United Kingdom Holdings PLC

3M United Kingdom PLC

3M Unitek Corporation

3M Vietnam

3MUnitek GmbH

CUNO Engineered Products, Inc.

CUNO Filtration Asia Pte. Ltd.

CUNO Filtration SAS

CUNO Incorporated

CUNO Pacific Pty Ltd.

Dyneon GmbH & Co. KG

HighJump Software, LLC

Kyuno Kabushiki Kaisha Sumitomo

Laboratories 3M Sante SAS

Nadco Japan Limited

Riker Laboratories, Inc.

Seaside Insurance Limited

Security Printing and Systems Ltd.

Sumitomo 3M Ltd

Suomen 3M Oy

Yamagata 3M Limited

3M Asia Pacific Pte Limited

3M BRCKNELL

3M Korea Hightech Limited

3M Lanka Private Limited

3M Pakistan (Private) Limited

3M Pharmaceuticals Pty Ltd

3M Wroclaw Sp. Z.o.o

Iwate 3M LTD

3M International Trading (Shenzen) Company Limited

Ajay Nanavati

B.V. Shankaranarayana Rao

Sadhana Kaul (w.e.f October 9, 2009)

Notes: i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the period. ii. The above information has been determined to the extent such parties have been identified on the basis of information provided by the Company, which has been relied upon by the auditors.

2. Taxation

a) The tax year for the Company being March 31, the provision for taxation for the period is the aggregate of the provision made for the 3 months ending March 31, 2009 and the provision based on the figures for the remaining 12 months upto March 31, 2010. The ultimate tax liability will be determined on the basis of the figures for the period April 1, 2009 to March 31, 2010.

3. The Company does not have a scheme for grant of its stock options either to the Executive Directors or employees for the shares issued in India.

However, the Executive Directors and some senior employees of the Company are entitled to Restricted Stock Options plans of 3M Company, USA.

Further, 3M Company, USA the holding Company has offered a ‘General Employees Stock Purchase Plan’ to all the employees of the Company. In accordance with the plan, the Company during the period has deducted for remittance a sum of Rs. 41,26,116 (2008: Rs. 41,39,045) and cumulatively amounting to Rs. 1,81,30,411 (2008: Rs.1,40,04,295) from the salary of the employees who have opted for the plan. As of the period end a sum of Rs. 3,39,193 (2008: Rs. 2,65,773) is pending remittance to the holding Company and the same is included under Other Liabilities (Schedule 9).

With respect to the above plans no cross charges/debits have been made by 3M Company, USA.

4. Inter-Company Agreements / Arrangements

a. Intellectual Property Agreement – The Company had entered into Intellectual Property Agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 5,41,41,934 for the period July 1, 2009 to March 31, 2010.

b. Support Services/Corporate Management Fees – Company entered into support services agreement with 3M Company, USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company would be charged a comprehensive support services charges by 3M Company, USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009.

c. Contract Research Agreement – The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the period under review, Company has received an amount of Rs.12,32,33,781 (including an amount of Rs. 6,06,97,941 for earlier years).

5. The Company’s manufacturing plant at Ahmedabad had a breakout of fire on March 20, 2010. On the basis of evaluation by surveyor/assessor and internal technical evaluations it was ascertained that there was damage to raw materials, intermediaries, finished goods , plant and machinery and civil structure. The Company has put a provisional insurance claim for Rs.2,02,90,738. As the Company is still in the process of ascertaining the entire damage, there is no loss envisaged by the Management in the Company’s books.

6. (i) Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current period classification.

(ii) The Company has changed its accounting year from calendar year (January–December) to financial year (April–March) with effect from January 1 , 2009. Accordingly the current year’s financial statements are for fifteen months from January 1, 2009 to March 31, 2010. The previous year’s figures relate to 12 months ended December 31, 2008.

(iii) In view of the above, the current period figures are accordingly, not comparable to those of the previous year.