Notes to Accounts of First Leasing Company of India Ltd.

Mar 31, 2013

NOTE NO.1 : CORPORATE INFORMATION

First Leasing Company of India Limited (FLCI) is a Public Company incorporated in India, in the year 1973, under the Companies Act, 1956 and having its Shares listed in Madras, Mumbai and National Stock Exchanges. FLCI is classified with effect from 14th March 2013 as Non-Deposit taking Asset Financing Company. FLCI is primarily engaged in the business of Leasing / Hire Purchase and also granting loans to Corporate and other entities. It also earns income from the activity of Electricity generation from Wind Energy.

NOTE NO.2 : BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

The Company maintains its books of account and prepares the Financial Statements on accrual basis following the historical cost convention in accordance with generally accepted accounting principles ("GAAP") and in compliance with provisions of the Companies Act, 1956 and the Accounting Standards as specified in the Companies (Accounting Standard) Rules, 2006 prescribed by the Central Government to the extent applicable to this Company.

The Company follows Capital adequacy norms besides prudential norms for income recognition and provisioning for Non-Performing and Standard Assets as prescribed by Reserve Bank of India for Non-Banking Financial Companies from time to time.

II AS - 3 - SEGMENT REPORTING:

The Company is primarily engaged in Hire Purchase/Lease Finance. There is no reportable segment other than primary segment, in terms of the above accounting standard.

III AS - 4 - RELATED PARTY DISCLOSURE:

(i) List of Related party where control exists:

Key Management Personnel: Mr. Farouk Irani - Managing Director

(ii) Related Party Transactions

Remuneration – Rs. 108.34 Lacs (Rs. 104.59 Lacs)

IV AS - 5 - LEASE / HIRE PURCHASE TRANSACTIONS: (1) Leases

(I) Aggregate of Minimum lease payments - Rs. 21,607.19 Lacs (Rs. 23,096.87 Lacs) (ii) Net carrying amount - Rs. 17,642.84 Lacs (Rs. 18,849.81 Lacs)

(iii) Maturity pattern of Gross / Net receivable:

(iv) Unearned Finance income – Rs. 3,964.35 Lacs (Rs. 4,247.06 Lacs)

(v) All initial direct costs are recognised as expenses in the Profit and Loss statement at the inception of the lease.

(vi) Accumulated provision for uncollectible minimum lease payments receivable Rs. 16.57 Lacs (Rs. 32.50 Lacs)

(2) Stock on Hire:

(i) Aggregate of Minimum Hire Rentals – Rs. 1,80,600.96 Lacs (Rs. 1,64,924.59 Lacs)

(ii) Net carrying amount – Rs. 1,58,835.87 Lacs (Rs. 1,42,154.68 Lacs)

(iii) Maturity pattern of Gross / Net receivable

VI AS - 6 - ACCOUNTING FOR TAXES ON INCOME:

Deferred Tax:

Rs. 396.23 Lacs (Rs. 604.96 Lacs) is recognised towards the current year provision, arising out of timing differences, as per the Accounting Standard – 22.

The major components of deferred tax assets and liabilities arising on account of timing differences are:

VII AS - 7 - IMPAIRMENT OF ASSETS:

Assets have been reviewed at balance sheet date for impairment, as per the above Accounting Standard.

VIII AS - 8 - CONTINGENT LIABILITIES & ASSETS

(i) Pending contracts to be executed (Rs. in Lacs)

Particulars As at 31.03.2013 As at 31.03.2012

Estimated amount of contracts remaining to be executed on

Capital Account/Lease & H.P. Disbursements not provided for 108.28 821.28

(ii) Claims against the Company not acknowledged as debts:

Tax Demands against the Company not acknowledged as Debts

(a) Disputed Income Tax demand of Rs. 1,977.53 Lacs (Rs. 1,841.29 Lacs) against the Company in respect of which appeals/ waiver petitions have been preferred and are pending with Appropriate Authorities. However the Company has paid under protest Rs. 913.73 Lacs (Rs. 858.44 Lacs) and balance demand has been stayed by the Appellate authorities. Based on expert legal opinion, the Company is of the view that it has fair chances of success in the appeal and entitled for refund of the amount paid.

(b) Interest Tax demand of Rs. 48.93 Lacs (Rs. 48.93 Lacs) has been contested in appeal proceedings. The Company has paid Rs. 39.13 Lacs (Rs. 39.13 Lacs). The Company is of the view that it has a fair chance of success in the appeal and hence no provision has been made for the balance amount of Rs. 9.80 Lacs in the books of account.

(c) Sales Tax demands of various states aggregating to Rs. 1,744.36 Lacs (Rs. 1,644.72 Lacs) have been contested before different Appellate authorities including the Hon''ble Supreme Court. These demands have been stayed by respective Appellate Authorities. The company is confident of successful outcome in the appeals and in the event of any liability arising the same would devolve upon the ultimate hirers /lessees and hence no provision has been made in the books of account. The Company has furnished Bank Guarantees amounting to Rs. 49.17 Lacs (Rs. 49.17 Lacs) and its own guarantee of Rs. 1,233.69 Lacs (Rs. 993.93 Lacs).

X CURRENT LIABILITIES

a. Short Term Borrowings

Short Term Borrowings include loans, Commercial Papers and Cash Credit facilities availed from various Banks that are due and payable in the next 12 months from the reporting date.

The maximum amount outstanding towards borrowing under Commercial Paper at any point of time, during the year is Rs. 10,000 Lacs (Rs. 20,000 Lacs) and the outstanding as at 31st March 2013 is Rs. 5,000 Lacs (Rs. 8,000 Lacs)

b. Other Current Liabilities

There is no amount due and payable to Micro and Small Enterprises, in terms of sec.22 of the Micro, Small, Medium Enterprises Development Act, 2006. The information has been determined on the basis of the information available with the Company.

XI NON CURRENT ASSETS

a. Intangible Asset:

Computer Software is grouped under Intangible Asset and is being depreciated @40% under written down value method.

b. Long Term Loans & Advances:

In the opinion of the Board of Directors, the Long Term Loans and Advances will have value, on realisation in the ordinary course of business, at least equal to the amounts at which they are stated in the accounts.

XII CURRENT ASSETS

Confirmation of balances from parties listed under Trade Receivable, is being obtained.

XV General

Figures have been re-grouped, re-arranged and re-classified wherever necessary to confirm to the schedule VI Format under the Companies Act, 1956. The figures in brackets relate to the year ended 31st March 2012.

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Mar 31, 2012

NOTE NO.1 : CORPORATE INFORMATION

First Leasing Company of India Limited (FLCI) is a Public Company incorporated in India, in the year 1973, under the Companies Act, 1956 and having its Shares listed in Madras, Mumbai and National Stock Exchanges. FLCI is classified as Deposit Accepting Asset Finance Company by the Reserve Bank of India. FLCI is primarily engaged in the business of Leasing / Hire Purchase and also granting loans to Corporate and other entities. It also earns income from the activity of Electricity generation from Wind Energy.

NOTE NO.2 : BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES BASIS OF PREPARATION

The Company maintains its books of account and prepares the Financial Statements on accrual basis following the historical cost convention in accordance with generally accepted accounting principles ("GAAP") and in compliance with provisions of the Companies Act, 1956 and the Accounting Standards as specified in the Companies (Accounting Standard) Rules, 2006 prescribed by the Central Government to the extent applicable to this Company.

The Company follows Capital adequacy norms besides prudential norms for income recognition and provisioning for Non-Performing and Standard Assets as prescribed by Reserve Bank of India for Non-Banking Financial Companies from time to time.

a. Terms / Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs.10/- per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing annual general meeting.

During the year ended 31st March 2012, a dividend of Rs. 1.80 per Share, is recommended by Board of Directors (Previous year - Rs. 2.00 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 payment of preferential amounts. The distribution will be in proportion to the number of equity shares held by the Shareholders.

a) Term Loans obtained from other parties (Financial Institutions) are secured by hypothecation of Equipments hired out and assignment of rentals thereof and repayable in 41 instalments.

b) Deposits from public and Share holders carry interest ranging between 8.00% and 9.96%. No deposit is accepted with a maturity period of less than 12 months period and more than 36 months. Rs. 1,373.81 Lacs out of the Long Term Public Deposit is repayable within one to two years and the balance of Rs. 842.98 Lacs is repayable after two years from the reporting date.

c) Inter Corporate Deposits are accepted for short term period of not more than 180 days with interest rate ranging from 9.50% to 14.00%

d) There are no loans taken from related party during the current year. (Rs. 821.85 Lacs)

e) The Company has not defaulted in repayment of any Loan or Deposit and interest thereon.

II AS - 17 - SEGMENT REPORTING:

The Company is primarily engaged in Hire Purchase/Lease Finance. There is no reportable segment other than primary segment, in terms of the above accounting standard.

III AS - 18 - RELATED PARTY DISCLOSURE:

(i) List of Related party where control exists:

Key Management Personnel: Mr. Farouk Irani - Managing Director

(ii) Related Party Transactions

Remuneration - Rs. 104.59 Lacs (Rs. 177.95 Lacs)

Interest paid on Fixed Deposits - Rs. Nil (Rs. 54.77 Lacs)

IV AS - 19 - LEASE / HIRE PURCHASE TRANSACTIONS:

(1) Leases

(I) Aggregate of Minimum lease payments - Rs. 23,096.87 Lacs (Rs. 26,089.71 Lacs)

(ii) Net carrying amount - Rs. 18,849.81 Lacs (Rs. 19,991.96 Lacs)

(iii) Maturity pattern of Gross / Net receivable:

(iv) Unearned Finance income - Rs. 4,247.06 Lacs (Rs. 6,097.75 Lacs)

(v) All initial direct costs are recognised as expenses in the Profit and Loss statement at the inception of the lease.

(vi) Accumulated provision for uncollectible minimum lease payments receivable Rs. 32.50 Lacs (Rs. 181.88 Lacs)

(2) Stock on Hire:

(i) Aggregate of Minimum Hire Rentals - Rs 1,64,924.59 Lacs (Rs. 1,37,192.38 Lacs)

(ii) Net carrying amount - Rs 1,42,154.68 Lacs (Rs. 1,23,145.02 Lacs)

(iii) Maturity pattern of Gross / Net receivable

(iv) Unearned Finance income - Rs. 22,769.91 Lacs (Rs 14,047.36 Lacs)

(v) Accumulated provision for uncollectible hire payments receivable is Rs. 72.07 Lacs (Rs.167.39 Lacs)

VI AS - 22 - ACCOUNTING FOR TAXES ON INCOME:

Deferred Tax:

Rs. 604.96 Lacs (Rs. 1,111.97 Lacs) is recognised towards the current year provision, arising out of timing differences, as per the Accounting Standard - 22.

VII AS - 28 - IMPAIRMENT OF ASSETS:

Assets have been reviewed at balance sheet date for impairment, as per the above Accounting Standard

VIII AS - 29 - CONTINGENT LIABILITIES & ASSETS

(i) Pending contracts to be executed

Particulars As at 31.03.2012 As at 31.03.2011

Estimated amount of contracts remaining to be executed on Capital Account/Lease & H.P. Disbursements not provided for 821.28 620.72

(ii) Claims against the Company not acknowledged as debts:

Tax Demands against the Company not acknowledged as Debts

(a) Income Tax demand of Rs. 1,841.29 Lakhs (Rs. 1,879.12 Lacs) against the Company in respect of which appeals have been preferred and are pending with Appellate Authorities. However the Company has paid under protest Rs. 858.44 Lacs besides a refund of Rs. 63.50 Lacs due from and adjusted by the department (Rs. 955.91 Lacs) and balance demand has been stayed by the Appellate authorities. Based on expert legal opinion, the Company is of the view that it has fair chances of success in the appeal and entitled for refund of the amount paid.

(b) Interest Tax demand of Rs. 48.93 Lakhs (Rs. 48.93 Lacs) has been contested in appeal proceedings. The Company has paid Rs. 39.13 Lacs (Rs. 39.13 Lacs). The Company is of the view that it has a fair chance of success in the appeal and hence no provision has been made for the balance amount of Rs. 9.80 Lacs in the books of account.

(c) Liability towards Fringe Benefit Tax of Rs. 22.58 Lacs (Rs. 22.58 Lacs) has not been provided for in the accounts as the Company has challenged the validity of such a levy before the Hon'ble Supreme Court of India. There is no liability to be provided in this regard with effect from 1st April, 2009 in view of the repeal of the levy.

(d) Sales Tax demands of various states aggregating to Rs. 1,644.72 Lacs (Rs. 1,224.41 Lacs) have been contested before different Appellate authorities including the Hon'ble Supreme Court. These demands have been stayed by respective Appellate Authorities. The company is confident of successful outcome in the appeals and in the event of any liability arising the same would devolve upon the ultimate hirers /lessees and hence no provision has been made in the books of account. The Company has furnished Bank Guarantees amounting to Rs. 49.17 Lacs (Rs. 49.17 Lacs) and its own guarantee of Rs. 993.93 Lacs (Rs. 51.53 Lacs)

IX NON CURRENT LIABILITIES

Long term borrowings

Long Term borrowings include Loans availed from Banks, Financial Institutions and as Public Deposits which are due beyond 12 months from the reporting date.

X CURRENT LIABILITIES

a. Short Term Borrowings

Short Term Borrowings include loans, Commercial Papers, Public Deposits and Cash Credit facilities availed from various Banks that are due and payable in the next 12 months from the reporting date.

The maximum amount outstanding towards borrowing under Commercial Paper at any point of time, during the year is Rs. 20,000 Lacs (Rs. 20,000 Lacs) and the outstanding as at 31st March 2012 is Rs. 8,000 Lacs (Rs. 14, 500 Lacs)

As per the directions of the Reserve Bank of India, the Company has created a floating charge in favour of IDBI Trusteeship Services Ltd., the Trustee, on the Statutory Liquid Assets maintained by the Company.

b. Other Current Liabilities

There is no amount due and payable to Micro and Small Enterprises , in terms of sec.22 of the Micro, Small, Medium Enterprises Development Act, 2006. The information has been determined on the basis of the information available with the Company.

The figures stated under the unpaid Dividends, Unpaid matured Deposits and unpaid interest do not include any amount due to be credited to Investors Education & Protection Fund.

XI NON CURRENT ASSETS

a. Intangible Asset:

Computer Software is grouped under Intangible Asset and is being depreciated @40% under written down value method.

b. Long Term Loans & Advances:

In the opinion of the Board of Directors, the Long Term Loans and Advances will have value, on realisation in the ordinary course of business, at least equal to the amounts at which they are stated in the accounts.

XII CURRENT ASSETS

Confirmation of balances from parties listed under Trade Receivable, is being obtained.

XIII General

Figures have been re-grouped, re-arranged and re-classified wherever necessary to conform to the revised Schedule VI Format under the Companies Act, 1956. The figures in brackets relate to the year ended 31st March 2011.

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Mar 31, 2011

(a) AS-29 - CONTINGENT LIABILITIES & ASSETS:

S. No. Particulars 31.03.2011 31.03.2010 (Rs. in Lacs) (Rs.in Lacs)

(i) Estimated amount of contracts remaining to be executed on Capital Account/Lease & H.P Disbursement not provided for 620.72 12.92

(ii) Claims against the Company not acknowledged as debts:

Tax Demands against the Company not acknowledged as Debts:

(a) Income Tax demand of Rs. 1,879.12 Lacs (Rs. 3,467.77 Lacs) against the Company in respect of which appeals have been preferred and are pending with Appellate Authorities. However the Company has paid under protest Rs. 955.91 Lacs ( Rs. 789.92 Lacs) and balance demand has been stayed by the Appellate Authorities. Based on expert legal opinion, the Company is of the view that it has fair chances of success in the appeal and entitled for refund of the amount paid.

(b) Interest Tax demand of Rs. 48.93 Lacs (Rs. 48.93 Lacs) has been contested in appeal proceedings. The Company has paid Rs. 39.13 Lacs (Rs. 39.13 Lacs). The Company is of the view that it has a fair chance of success in the appeal and hence no provision has been made for the balance amount of Rs. 9.80 Lacs in the books of account.

(c) Liability towards Fringe Benefit Tax of Rs. 22.58 Lacs (Rs. 22.58 Lacs) has not been provided for in the accounts as the Company has challenged the validity of such a levy before the Hon'ble High Court of Madras. There is no liability to be provided in this regard with effect from 01.04.2009 in view of the repeal of the levy.

(d) Sales Tax demands of various states aggregating to Rs.1,224.41 Lacs (Rs. 888.77 Lacs) have been contested before different Appellate Authorities including the Hon'ble Supreme Court. These demands have been stayed by respective Appellate Authorities. The company is confident of successful outcome in the appeals and in the event of any liability arising the same would devolve upon the ultimate hirers / lessees and hence no provision has been made in the books of account. The Company has furnished Bank Guarantees amounting to Rs. 49.17 Lacs (Rs. 46.15 Lacs) and its own guarantee of Rs.51.53 Lacs (Rs. 344.98 Lacs).

(b) Unsecured Loans:

i. Commercial Papers:

The maximum amount outstanding at any point of time, during the year is Rs. 20,000 Lacs (Rs. 20,000 Lacs) and the outstanding as at 31st March 2011 is Rs. 14,500 Lacs (Rs. 5,000 Lacs )

ii. Public Deposit:

As per the directions of the Reserve Bank of India, the Company has created a floating charge in favour of IDBI Trusteeship Services Ltd., the Trustee, on the Statutory Liquid Assets maintained by the Company.

4) CURRENT ASSETS :

In the opinion of the Board of Directors, all Current Assets, Loans and Advances will have value, on realisation in the ordinary course of business, at least equal to the amount at which they are stated in the accounts.

5) SUNDRY DEBTORS :

Confirmation of balances from Sundry Debtors are being obtained.

6) SUNDRY CREDITORS INCLUDE :

i. Amount due to Managing Director – Rs. 103.47 Lacs (Rs. 142.64 Lacs)

ii. The Company has no outstanding dues to any Small Scale Industrial unit as defined in Industries (Development & Regulation) Act, 1951.

iii. In terms of sec.22 of the Micro, Small Medium Enterprises Development Act, 2006, there are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding as at 31st March 2011. The information has been determined on the basis of the information available with the Company. Hence the question of furnishing additional information as per the said Act does not arise.

iv. Confirmation of balances from Sundry Creditors are being obtained.

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Mar 31, 2010

1) ACCOUNTING STANDARDS:

(a) AS-17 - Segment Reporting:

The Company is primarily engaged in Hire Purchase/Lease Finance. There is no reportable segment other than primary segment, in terms of the above accounting standard. 24

(b) AS-18 - Related Party Disclosures:

(i) List of Related party where control exists:

Key Management Personnel: Mr. Farouk Irani – Managing Director

(ii) Related Party Transactions

Remuneration - Rs. 90.48 Lacs (Rs. 182.18 Lacs)

(iv) Unearned Finance income - Rs. 5,702.46 Lacs (Rs. 5,069.32 Lacs)

(v) All initial direct costs are recognised as expenses in the Profit and Loss account at the inception of the lease.

(vi) Accumulated provision for uncollectible minimum lease payments receivable - Rs. 45.80 Lacs (Rs. 36.84 Lacs).

(e) AS-22 - Accounting for Taxes on Income:

Rs. 872.75 Lacs (Rs. 1,193.62 Lacs) is recognised towards the current year provision, arising out of timing differences, as per the Accounting Standard - 22.

(f) AS-28 - Impairment of Assets Assets have been reviewed at balance sheet date for impairment, as per the above Accounting Standard.

(g) AS-29 - CONTINGENT LIABILITIES & ASSETS:

S. No. Particulars 2010 2009

(Rs. in Lacs) (Rs.in Lacs)

(i) Estimated amount of contracts remaining to be executed on Capital Account/Lease & H.P. Disbursement not provided for 12.92 41.74



(ii) The liability towards uncalled amounts on shares issued by Catholic Syrian Bank in respect of 4,000 Equity Shares is Rs. 3.80 Lacs. (iii) Claims against the Company not acknowledged as debts:

Tax Demands against the Company not acknowledged as Debts:

(a) Income Tax demand of Rs. 3,467.77 Lacs (Rs. 1,662.86 Lacs) against the Company in respect of which appeals have been preferred and are pending with Appellate Authorities. However the Company has paid under protest Rs. 789.92 Lacs (Rs. 686.09 Lacs) and balance demand has been stayed by the Appellate Authorities. Based on expert legal opinion, the Company is of the view that it has fair chances of success in the appeal and entitled for refund of the amount paid.

(b) Interest Tax demand of Rs. 48.93 Lacs (Rs. 48.93 Lacs) has been contested in appeal proceedings. The Company has paid Rs. 39.13 Lacs (Rs. 39.13 Lacs). The Company is of the view that it has a fair chance of success in the appeal and hence no provision has been made for the balance amount of Rs. 9.80 Lacs in the books of account.

(c) Liability towards Fringe Benefit Tax of Rs. 22.58 Lacs (Rs. 22.58 Lacs) has not been provided for in the accounts as the Company has challenged the validity of such a levy before the Honble High Court of Madras and stay has been granted. There is no liability to be provided in this regard with effect from 1st April 2009 in view of the repeal of the levy.

(d) Sales Tax demands of various states aggregating to Rs.888.77 Lacs (Rs. 793.85 Lacs) have been contested before different Appellate Authorities including the Honble Supreme Court. These demands have been stayed by respective Appellate Authorities. The company is confident of successful outcome in the appeals and in the event of any liability arising the same would devolve upon the ultimate hirers / lessees and hence no provision has been made in the books of account. The Company has furnished Bank Guarantees amounting to Rs. 46.15 Lacs (Rs. 97.69 Lacs) and its own guarantee of Rs. 344.98 Lacs (Rs. 293.44 Lacs).

(b) Unsecured Loans:

i. Commercial Papers:

The maximum amount outstanding at any point of time, during the year is Rs. 20,000 Lacs (Rs. 16,000 Lacs) and the outstanding as at 31st March 2010 is Rs. 5,000 Lacs (Rs. 13,000 Lacs)

ii. Public Deposit:

As per the directions of the Reserve Bank of India, the Company has created a floating charge in favour of IDBI Trusteeship Services Ltd., the Trustee, on the Statutory Liquid Assets maintained by the Company.

2) CURRENT ASSETS :

In the opinion of the Board of Directors, all Current Assets, Loans and Advances will have value, on realisation in the ordinary course of business, at least equal to the amount at which they are stated in the accounts.

3) SUNDRY DEBTORS :

Confirmation of balances from Sundry Debtors are being obtained.

4) SUNDRY CREDITORS INCLUDE :

i. Amount due to Managing Director – Rs. 142.64 Lacs (Rs. 126.44 Lacs)

ii. The Company has no outstanding dues to any Small Scale Industrial unit as defined in Industries (Development & Regulation) Act, 1951.

iii. In terms of sec.22 of the Micro, Small Medium Enterprises Development Act, 2006, there are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding as at 31st March 2010. The information has been determined on the basis of the information available with the Company. Hence the question of furnishing additional information as per the said Act does not arise.

5) The figures in the brackets relate to the year ended 31st March 2009 which have been re-classified wherever necessary to conform to classification for the current period.